Early Friday, the DXY index was up another 93 basis points at 80.40, up 5.91% from the 75.91 level it touched on November 4 — just three short weeks ago.
Since then, the Irish bailout and rumors of a similar arrangement looming on the horizon for Portugal or even Spain have pushed the euro back onto the defensive, while renewed artillery shelling from North Korea has unnerved traders in the Pacific Rim.
From here, the 200-day resistance line is in sight. Just a 1.7% push up from here, perhaps on a formal declaration of war between the Koreas over the weekend, would take the DXY index up beyond 81.77 trend line, converting current resistance into support and establishing a new upward trend for the dollar.
This, in turn, would push commodity prices in particular lower in a natural reverse move. (As commodities are traded in dollar terms worldwide, a stronger dollar translates into weaker effective prices on everything from grain to gold.)
Make no mistake: The dollar is not rallying here on strength in the labor market or a more robust U.S. retail environment. This is purely rooted in geopolitical factors.
Still, meanwhile, we seem tilting toward the “risk off” side of the world in the immediate term. Less PowerShares DB US Dollar Index Bearish ETF (NYSE:UDN), more PowerShares DB US Dollar Index Bullish ETF (NYSE:UUP).
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.