- Market Commentary -

January 20, 2009 (FinancialWire) (Investrend Forums Syndicate) (By Paul Lengeman) — With increased equity investor attention on U.S currency-driven stocks such as the PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP) and the PowerShares DB US Dollar Index Bearish Fund (NYSE: UDN), FinancialWire(tm) contributor Paul Lengeman offers the following commentary:

Market attitudes continue to confound the markets. If market participants had their way, they would keep on selling the US dollar no matter what. Evidence is mounting, however, that this entrenched point of view needs major adjustment.

Most important is the fact that the economic outlook for the US is looking better than anticipated earlier. If the economic number over the next two months keep showing improvement there is no doubt that the Fed will start raising interest rates and syphon off cash from the banking system. That should persuade market participants that the dollar is a good buy.

Then there are the problems generated by Iceland’s collapse and Greece’s fiscal problems with its potential negative impact on the EUR that should persuade investors that the dollar is the place to be.

Then, there are rumblings of a political crisis in Germany. A fall of the Merkel government does not necessarily mean a spillover effect into the international markets. But any disruption of the status quo in a leading economy is unsettling for the currency markets.

The market is not yet convinced that we are moving back into a new dollar period, but the trend in attitude is beginning to shift in favor of the dollar.

Paul Lengeman is president and CEO of FinVidea, and contributes regularly to FinVidea’s weblog. To contact Mr. Lengeman and/or to get a free trial subscription to all of FinVidea’s live video and weblog content, go to Investrend Syndications’ dedicated FinVidea webpage (http://www.investrend.com/finvidea).

See also:  “Venezuelan Bolivar Devalued 40 Percent” (http://www.financialwire.net/2010/01/11/venezuelan-bolivar-devalued-40-percent/) by FinVidea’s Paul Lengeman.

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