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Minyan Mailbag - Macro Chess Match

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Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

John,

With the 10 yr at a 4.34%, does that lend some support to the DXY? And if it does, doesn't it halt the fall of the DXY, in-turn killing the gold mkt?

Thanks for everything,
Minyan Craig

Craig,

The German rates are 50 bps less than U.S., while British rates are 30 bps higher. So on the margin the rate differentials still reflect monetary policy and do act on the change in the DXY.

This is all normal. But if the market perceives that we are entering an abnormal situation, as in 97 Asian currencies, no amount of rate differential will stem the movement out of dollars.

We are seeing marginal effects now of abnormal behavior. I can't predict if it will finally spill over because it simply is based on foreign perception. When I talk about dollar/yen, I never say it "will do this" I say "if it does this then this is what it means". I just try to point out the possibilities and when those possibilities become more probable.

Regards,
Prof. Succo

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