By Gary Scott

The US dollar is dropping but we must recognize that this may not be a one way dip.

Today’s article in The Financial Times shows two reasons why.

The article is titled “Dollar gains after China let off hook” and says:

“The under-fire US dollar staged a modest recovery in European morning trade on Thursday after the US Treasury stepped back from the brink of formally branding China a currency cheat.”

The article explains that the US Treasury did not formally name China a currency manipulator. Many currency traders believe that such a move would have made it more likely that China’s currency would appreciate and push the dollar down against all the Asian currencies.

This and the Fed’s raising of the US dollar interest rate by 25 basis points to 5 % on Wednesday, allowed the dollar to firm at $1.2713 against the euro, from a 12-month low of $1.2831 before the Treasury raised the interest rate. The greenback recovered to SFr 1.2271against the Swiss franc, from a one-year low of SFr1.2128, Y111.24 against the yen, from Wednesday’s eight-month low of Y110.11 and C$1.1056 against the Canadian dollar, having hit a more than a two year year low of C$1.0980 on Wednesday.

You can read the entire Financial Times article

I suspect that the raised interest rate had more to do with the dollar’s strength than the words over China.

There is an emotional point when a currency reaches a new numerical level. 5% seems much higher than 4.750%.

I do not think this will stop the dollar slide in the long term, but it serves as a warning for short term leveraged traders. This says, “Currency markets bounce up and down. Do not get caught in a short term liquidity crunch with margin calls caused by short term periods of dollar recovery.”

Plus this dollar firmness shows the power of interest rates. Interest rates are a prime mover of currency parities so let’s continue our analysis of the major currencies in terms of interest rates.

You can see the entire Dollar Dives review

And Dollar Dives II

And Dollar Dives III

Here are the current interest rates available on the major currencies according to the latest Economist magazine.

We can draw several thoughts by comparing these interest rates. Australia has the highest rate, but the rate is falling. Plus the rate in inverted. You get higher interest on short term deposits than long. This is a sign of no confidence and shows a lack of liquidity in the market. This is a downward sign which the British pound as has.

The US dollar has the second highest interest rate. With yesterday’s Fed increase, this rate will rise even more. Plus the interest rate rise since last year has been substantial! This will tend to bolster the greenback’s strength.

Third, Japan has the lowest interest rate. This adds downward pressure on the yen.

This interest rate analysis is positive from the dollar point of view. Canada comes second with a high and also has a rapidly rising interest rate.

Our last three reviews showed that the most fundamentally strong currencies were the Canadian dollar, Danish and Swedish kroner. The US dollar has been the worst. This interest rate review puts the Canadian dollar (in my humble opinion) at the top of the heap in terms of strength so far.

Based on this I am converting some of my pounds today and investing them into Canadian dollars instead. This does not mean you should rush in. There is still much more to review. So stay tuned for “Dollar Dives V” tomorrow!

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One way to protect against currency shifts is to earn globally. Delegates from our last Ecuador Import Export Expedition are selling many products now. Here are examples of how just one product available in Ecuador can create income.

Ecuador has textiles of all types. The Indigenous community has woven and spun for perhaps millenniums. Here is an example of the wonderful colored cloths that are available in cotton, green cotton, alpaca, llama and sheep’s wool.

These materials can be made into almost anything, Here they become a purse.

Here they are as a vest.

There are ponchos, scarves, coats, hats, sweaters, slippers and much more. The list is limited only by your imagination!

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Here’s a great health tip. Recently the press reported that Americans are sicker than English. The article said:

“A study shows that middle-aged, white Americans are much sicker than their counterparts in England, startling new research shows, despite U.S. health care spending per person that is more than double what England spends. A higher rate of Americans tested positive for diabetes and heart disease than the English. Americans also self-reported more diabetes, heart attacks, strokes, lung disease and cancer.

‘The gap between countries holds true for educated and uneducated, rich and poor. At every point in the social hierarchy there is more illness in the United States than in England and the differences are really dramatic,’ said study co-author Dr. Michael Marmot, an epidemiologist at University College London in England.

“The United States spends about $5,200 per person on health care while England spends about half that in adjusted dollars.”

You can read one of the many articles on this

Our son, Jake, who is a US-British dual national lived for years in Florida and Atlanta. Now he lives in the UK. Here are some of his thoughts on this.

“Dad, It's immediately obvious walking the streets. And of course the English are not exactly world famous for their healthy living habits. No doubt a comparison with Ecuadorians would be even more dramatic.

1) People in England walk probably ten times as much as Americans, partly because cities are more compact. American cities are built around the car. In addition fuel prices in the UK are so high people choose to walk when possible for economic reasons. 2) Food portions are literally double in the US and often half the price. One can't overestimate the negative effects of obesity. This makes walking even less likely and increases the likelihood of eating more and lower quality foods. 3) Food quality? I'm speculating here US food is 'bulk' and lower quality, especially in places like Denny's and Shoney's. In addition people in the UK tend not to eat out at breakfast. This is not a cultural tradition. In the UK eating fast food is somewhat of a guilty pleasure still, whereas in the US it is accepted as the norm. 4) Americans work longer and harder than just about anyone. It saturates the American consciousness and explains why coffee drinking in America is more of a power activity than a relaxing past time as is the case along hundreds of miles of outdoor cafe sidewalks in Europe. For millions of Americans it may be getting harder to fulfill the American dream and this creates stress. 5) The disintegration of real community is one of the major down sides of modern industrialized society is a global phenomenon but America seems to have taken it to a new level. No society is truly coherent but American society changes so fast and this may lead to enormous psychic stress and ultimately physical illness.”

A return to a simpler, more spiritual way of life will be the ultimate cure for us all, in America, the UK, everywhere. This will come sooner or later, whether we seek it or not! Jake.

This offers some good basic health ideas. #1: Walk more. #2: Eat less. #3: Improve your food quality. #4: Don’t work too hard. #5: relax more and spend more time with your family. #6: Embrace simplicity. #7: Lead a more spiritual life.

Sounds too simple to be true, but I doubt that any medicine could be more effective.

Until next message, may your currencies, earnings and health be good.

Gary

P.S. Look and feel better. Join us this August with Dr. Terry Hambrick DC for a week long program where you learn how to revitalize yourself. DETAILS