Yen Falls To A 24-year Low!

June 22, 2022

* dollar selling ends in the overnight markets

* Russia is not happy with the surge in the ruble… 

Good Day… And a Wonderful Wednesday to you! Well, how are you holding up in this heat? Ahhh, summer heat, you’ve gotta love it! That is unless you are a roofer, or other manual laborer that works outside in the sun! When I was a younger man, playing my guitar in the band, I used to work installing in-ground swimming pools in Oklahoma… Talk about working in the summer heat! But I was 18 at the time and the heat didn’t bother me because, I had grown up in house with only a one-room air conditioner, and was not allowed in that room during the day… I sat outside for a while yesterday, under an umbrella, and read a book.. it was hot for sure, but like I said yesterday, it IS Summer! My second favorite song by Chicago, greets me this morning: Beginnings…

The dollar continued its inch by inch drop yesterday, losing another index point in the BBDXY. Gold couldn’t find a bid all day though… It’s always strange to me when the dollar loses ground, but Gold can’t find a bid… Gold, on the day, lost $6, to close the day at $1,833.70. Silver on the other hand, speaking like a two handed economist, did find some buyers and the price in Silver rose 10-cents, to close the day at $21.76…

While we’re on Silver, I saw this bit of information yesterday, sent to me from the good Folks at GATA: “Recent data from the U.S. Commodity Futures Trading Commission suggests that Comex silver positioning is the most favorable since June 2019.

While this does not preclude more downside, it certainly suggests that any further price drops will be shallow.”

Chuck again… Yes, it does bode well for Silver, as long as the boys in the band decide to leave it alone… And Chances of that are slim and none, and Slim left town!

The price of Oil lost ground yesterday, after gaining it the day before… Oil ended the day trading with a $110 handle… Bonds were pretty much unchanged with only a 1 Basis Point drop in the 10-year’s yield.

In The Overnight markets last night… The dollar selling came to an abrupt end last night, and for some reason the overseas markets bought dollars, thus driving the BBDXY up 2 index points to 1,260 to start the day.  Gold has gained back the $6 it lost yesterday in the early trading today, and is up $7 today. Silver is giving up 19-cents to start the day..  The price of Oil has fallen out of bed in the past 24 hours, and trades this morning with at $104 handle, down over $5 overnight… 

Apparently, Oil traders finally realized that the global economies are heading to tough times, and even recessions in some countries, and the traders are running scared…  Really? They just now figured this out?  Oh well, the price of gas will be lower, and it’s about time to fill my gas tank! YAHOO! 

The 10-year Treasury’s yield has dropped more and this morning we start with a 3.20% yield… This is really getting stranger by the minute folks…I’m just saying! 

While looking up the markets prices this morning, I noticed that the price of Copper has really dropped, and trades this morning below the $4 level, for the first time in a month of Sundays… So, what’s this and the falling bond yields telling us? That, for some unknown reason, the markets participants are thinking that inflation has peaked!  

On of the things a good friend of mine, and one of my first bosses, Ed Bonawitz,  on the bond desk taught me many years ago… “the market is never wrong”… He would tell me that if you fought the markets, you would lose every time…  And this is one of those times that I feel the markets are wrong on this, but am I going to go out on a limb and be a contrarian, here? Nah, there are other fish to fry, and I think I’ll just let the markets get their rear ends handed to them! 

Well, the Japanese yen continued to drop and yesterday, reached a 24-year low VS the dollar… There are still not takers to participate in a coordinated intervention, to help the yen… The folks at the Bank of Japan (BOJ) have been wishin’ and hopin’ and thinkin’ and prayin’, for someone, anyone to say, Hey! Our currency is overvalued, we’ll sell our currency and buy yours! The only currency that’s overvalued is the dollar, and I just don’t see anyone at the U.S. Treasury thinking they need to save the yen… Besides, once the market hears that the U.S. was selling their dollars to buy yen, they would help them by selling even more dollars!

While the Japanese yen falls, the Russian ruble gains… The ruble has really outperformed all other currencies so far this year, and now the Russians are not happy with the surge in the ruble, and want to curtail the ruble’s ability to gain, without inviting inflation into their economy… I have an FWIW article on this later this morning, so please stick around for that!

Oh, and the Russian ruble has strengthened further overnight and trades with a 52 handle this morning! 

I had a dear reader send me a note and ask me to talk about the Singapore dollar (Sing)… She must be a newer reader because I used to talk about the sing quite a bit, and show that they were so tied to the Chinese renminibi, that it was scary… Not a technical tie to the renminbi, but a trading tie that basically followed the Chinese currency. Singapore is in competition with China for exports, and therefore can’t allow their currency to get to far out of whack from the renminbi… 

Moving on… The Asian currencies have been getting treated like a rental car, by the markets, and it’s all based on the fact that the Asian Central Banks have taken a more patient stance with rate hikes, VS the aggressive rate hikes by the Western Central Banks…   These folks (Asian Central Banks) have been doing this far longer than any other region, and they usually get it right, but this time, I have to question their collective lack of movement… But like I’ve said about the Japanese yen, they need inflation to spur on their economy… Not the kind of runaway inflation like we have here in the U.S. but 1-2% inflation in Japan would get things moving, for Japan has been in a deflationary scenario for over two decades now… 

The U.S. Data Cupboard today, still is lacking any real economic data, instead we get Fed Head talks… Today’s edition of Fed Heads on the talking circuit, will have Fed/ Cabal/ Cartel Chairman, Jerome Powell, testifying before the Senate Banking Committee… I’ve been quite hard on the Beaver, haven’t I June? I’ve called him on his lies, and intentional omittance of important information… So, I wonder what tid-bits he’ll throw out there today, that I’ll be able to diss him with? 

To recap… The dollar continued to get sold yesterday, but in the overnight markets the selling came to abrupt halt. Gold lost $6 yesterday, and has gained it back this morning…  The U.S. Data Cupboard is bare, and that’s really a good thing, because recent data has been just plain awful!  The yen has fallen to a 24 year low VS the dollar, while the Russian ruble continues to gain VS the dollar… 

For What It’s Worth… As I mentioned above, this is an article that talks about what Russia can do to halt the surge of the ruble, without allowing inflation and it can be found here: RUB USD Russia Debates Ruble Fix Without Dismantling Inflation Targeting – Bloomberg

Or, here’s your snippet: “ Russian officials are considering ways to keep the ruble on a tight leash without abandoning inflation targeting as they hunt for tools to tame the currency’s surge after sanctions ended the central bank’s ability to intervene directly.

Rather than removing a commitment to target price growth, officials would need a new mechanism as long as sanctions on the central bank are in place, according to people familiar with the matter. Among other options being considered is a further loosening of rules on currency operations for companies active abroad and more access to foreign exchange for households and businesses at home, they said.

The debate spilled into the public this week when First Deputy Prime Minister Andrey Belousov revealed authorities had discussed prioritizing economic growth and setting a goal for the ruble instead of inflation. The issue has taken on more urgency as the ruble surged to a seven-year high, increasingly posing a threat to exporters and public finances.

In the view of some senior officials, Russia needs to devise alternative instruments that would help steer the ruble in a way similar to a system the central bank had in place until 2014, the people said, asking not to be identified because the information isn’t public. At the time, it used foreign reserves to manage currency swings within a corridor.

Belousov, one of President Vladimir Putin’s top economic advisers, has said an “optimal” level for the ruble is between 70 to 80 rubles per dollar, relative to its Monday closing price of near 55.5. The Finance Ministry based its budget calculations for 2022-2023 around an exchange rate of about 77 and envisages a weaker ruble in the two subsequent years.”

Chuck again… Well, you may want your currency to be 77/ weaker, but this is what happens when you allow the markets to determine a currency’s value… You’ve already cut your interest rate from 20% down to single digits… if that didn’t scare away investors, I don’t think jawboning lower, it will help you…

Market Prices 6/22, 2022: American Style: A$ .6903,  kiwi .6255, C$ .7705, euro 1.0520, sterling 1.2240, Swiss $1.0351, European Style: rand 15.9647, krone 9.9640, SEK 10.1409,  forint 375.96,  zloty 4.4533,  koruna 23, 4855, RUB 52.87, yen 136.18, sing 1.3892, HKD 7.8500, INR 78.38, China 6.7124, peso 20.08, BRL 5.1274,  BBDXY 1,260.17, Dollar Index 104.50, Oil $104.74, 10-year 3.20%, Silver $21.49, Platinum $940.00, Palladium $1,885.00, Copper $3.98, and Gold… $1,839.96

That’s it for today…  Well that was quite a game at the plate for Cardinals rookie Nolan Gorman last night, as the Cardinals won their game VS the Brewers… Like I said yesterday, they need to win VS the Brewers, and last night was a start! I getting excited about tomorrow night… We’re going to see Sebastian Maniscalco, who in his specials on cable, had me cracking up and laughing out loud…  Should be a good time!  Be careful out in the sun folks, no need to get a heat stroke!  Neil Young takes us to the finish line today with his song: Four Strong Winds… I hope you have a Wonderful Wednesday today, and please remember to Be Good To Yourself! 

Chuck Butler