Another Record Low in the Dollar

On Tuesday, April 22nd, the dollar made a new record low, reaching 71.33 on the US Dollar Index. There was no downside follow-through, however, and the Index finished the week at 72.79. So it is basically at the same level when the month began and significantly, still well below important overhead resistance at the 73.30-73.50 level.

The above weekly chart of the Dollar Index shows just how bad the carnage has been. From its peak of 120.97 in July 2001 to its trough last week, the Index has dropped 41.0%.

There is no sign of a bottom being made on the above chart, which is not surprising. After all, what are the Treasury Department and the Federal Reserve doing to strengthen the dollar?

I was going to say nothing, but the reality is even worse than that. One of the most important tools the Federal Reserve has at its disposal to change the prospects for the dollar is the ability to raise interest rates. But rather than raising interest rates, which is what Paul Volcker did when he was chairman of the Federal Reserve during the last major dollar crisis, Ben Bernanke has been lowering them.

Another 1/4% cut is being forecast for the next FOMC meeting. Surely that cut will further lower the demand for the dollar, particularly when compared to the unwillingness of the European Central Bank to lower interest rates in view of worsening inflation.

The precious metals continue to correct their big gains from last summer to March. The following charts show that the precious metals remain in clear uptrends.

Published by GoldMoney
Copyright © 2008. All rights reserved.
Edited by James Turk, alert@goldmoney.com