Dollar Optimists vs. Pessimists

Jack Crooks takes examines the opinions and arguments of dollar pessimists and optimists. Mr. Crooks takes a closer look at the lengths the Federal Reserve will go to in order to preserve the and sustain growth regardless of inflation.

The Federal Open Market Committee (FOMC) is meeting soon. A lively topic of conversation that can be expected from currency traders is the direction of the infamous Fed Funds rate. The obvious question leading up to the interest rate decision: What are the implications of this FOMC meeting on the U.S. dollar More specifically, has the Fed Funds rate found a bottom, or does the U.S. central bank have more work to do

Dollar pessimists believe there is still no positive argument in favor of the U.S. economy. The Federal Reserve's dual mandate, maintaining economic growth and price stability, has become quite popular in currency circles. Much of the dollar's demise has been attributed to the Fed's obligation to sustain growth, even when inflation isn't necessarily contained. And keeping the U.S. economy ahead hasn't been an easy task for them. Some of the problems catching up with the economy and infecting the core are:

- An unstable manufacturing sector;

- Deteriorating business conditions;

- Sluggish consumer spending;

- Serious slack in the labor market;

- And a widespread feeling that money isn't so easy to come by anymore.

All of the aforementioned troubles have been initiated or exacerbated by the ongoing U.S. housing market collapse. The impact of the housing debacle on U.S. consumers has been swift, sudden, and severe. American Express recently told analysts that financially stressed consumers are making fewer payments less often.

Conversely, dollar optimists believe intense commodity inflation will force an adjustment to Fed policy. The Fed's dual mandate has left them somewhat attached to a sinking economy, but they sometimes recognize that inflation risks exist. The fear of inflation and inflation are two different entities and the Fed has the job of keeping both under control. Imagine what the Fed is thinking right now.

Crude oil recently topped $119 a barrel. But beyond the heavily monitored energy prices, food has also been in high demand. Riots have broken out in Haiti because of food shortages. A handful of countries that include China and India have pulled back on their rice exports in order to sufficiently meet domestic demand. And the U.S. recently learned that Sam's Club and Costco are monitoring the amount of bulk rice purchases they allow customers to make.

Dollar optimists believe that inflation on commodities will ultimately warrant some kind of adjustment to Fed policy. Consequently, this would be good news for the greenback because few analysts will argue that the Federal Reserve needs to hike interest rates. But the possibility that the fed may halt its easing campaign is growing among analysts.

"A monetary policy revaluation could spark a legitimate dollar rally.

If Fed Chairman Ben Bernanke and Co. were to carve out a bottom-turn in their easing campaign, it just might give buyers enough reason to come out in support of the dollar. And a legitimate dollar rally would likely impact commodities, considering the extreme negative correlation that's existed between the two parties," Crooks states.

To read this issue online, please visit:

http://www.moneyandmarkets.com/Issues.aspxNewsletterEntryId=1704

About JACK CROOKS & MONEY AND MARKETS

John (Jack) Crooks is the founder and president of Black Swan Capital, an independent advisory firm specializing in foreign exchange and currency markets investing for retail and institutional clients. A seasoned financial advisory with nearly 20 years of investment experience, Mr. Crooks uses both quantitative and qualitative approaches to determine the fundamental driving force(s) behind the movement of the currency, capital, and commodities markets. He is the editor of Weiss Research's latest investment offerings, World Currency Alert and World Currency Options, which were launched in August 2007.

Mr. Crooks also founded Ross International Asset Management, a discretionary money management firm specializing in global stock, bond, and currency asset management for retail clients. Previously, he was general manager of Plexus Trading, where he specialized in currency futures and commodities trading. During his successful career, Mr. Crooks served as chief currency and futures strategist of M2 Futures Inc., an investment boutique headquartered in Chicago, as well as vice president of Global Strategic Research for an international investment boutique, where he was responsible for providing daily advice and global strategy analysis.

Prior to entering the investment arena, Mr. Crooks held various corporate finance positions. He has written extensively on the subject of global currencies and international economics and has been published in Asian Times, Futures Magazine, Barron's, Bloomberg, Dow Jones Newswire, and across many financial websites. He has also appeared on Bloomberg TV and CNBC.

Mr. Crooks holds a bachelor's degree in finance from Florida State University and a master's in business administration from the University of North Texas.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.

Dollar Optimists vs. Pessimists

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Dollar Optimists vs. Pessimists

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