The dollar fell Thursday because of talks initiated between Britain and Germany to set the terms for British exit from the European Union. The hope of a reasonable outcome boosted both sterling and euro, which are priced against the dollar. Also hurting the Greenback was a nearly 50-year low in applications for unemployment benefits, at 203,000 last week, a level last seen in December, 1969. This means that there is a real threat of inflation which will undermine so-far benign Federal Reserve moves raising interest rates.
The dollar also weakened against the Yen after the Justice Dept. charged North Korean hackers over last year’s WannaCry ransomware attack, the theft of $80 million from the Bangladesh Central Bank in 2016, and the cyber attack on Sony Corp in 2014. The hacker, Park Jin Hyok, has close ties to the Kim Jung-Un.
Moreover the rumors about instability in the Trump Administration, along with worries about impeachment, had a negative impact on the US dollar, while Chinese plans to retaliate for any tariff hikes by our country will also cause inflation as Americans will have to pay more for Chinese goods they crave. Sept. 6 is the day $200 million of new tariffs on Chinese goods are supposed to be imposed by President Trump—if he dares.
Stronger currencies chopped the prices of most foreign stocks on Sept. 6, a side effect of the move out of emerging markets currencies which is continuing, and out of the dollar, which is strengthening.
In case you were unaware, the former KGB was behind the attempted poisoning of a former spy and his daughter in Salisbury, England, probably at the orders of the former KGB operative, Vladimir Putin.
If I am forced to predict what comes next, I think the Administration will blink. And I also think the selloff of emerging market shares and currencies will reverse, particularly for the South African Rand which is suffering from slower growth rather than a real crisis. I also think Canada, backed by many American workers and members of congress, will not give way on its serious objections to the NAFTA terms: protection for Canadian cultural businesses against being swamped by US exports, and anti-dumping panels. And, no, Mexico will not build that wall.
More about what this means follows, with news mostly about Argentina. But we also have news from Australia, Bahrain, Belgium,.Brazil, Britain, Canada, Colombia, Denmark, Germany, India, Israel, Jordan, Kazakhstan, Kuwait, Lebanon, Mexico, Oman, Qatar, the Palestinian territories, South Africa, and the United Arab Emirates.
Don’t Cry For Me, Argentina
The imposition of Argentina export taxes on our Orocobre caused overnight panic in OROCF’s homeland, Australia, where investors are not good at globalism. The stock fell 17% Down Under to the equivalent of $2.5496 (at the US opening) and where I averaged down. This is an opportunity to load up on lithium for electric cars at a price not seen for over 3 years. The tariffs are temporary, along with very high interest rates. The IMF aims to stabilize Pres. Mauricio Macri’s currency and budget. Meanwhile OROCF has a deep-pocketed backer, a subsidiary of Japanese car-maker Toyota. The Australian (newspaper) calls the stock a screaming buy today which may influence the primary market overnight. This is a 7.8% tax which is “temporary” according to Buenos Aires. It applies to all exports in theory until the end of 2019, however unlikely. If there is no recovery by then the export tax will be scrapped but it won’t say this because Argentina wants to export now. The levy could cut OROCF profits by as much as 50% but that is only if you omit the lower Argentina production now compared pre-crisis.
