StackerKen
3rd June 2010, 09:43 AM
They say a falling market turns around when the last bull turns bearish and sells. That may be happening to the euro as it hovers near four-year lows.
A report by Agence France Presse, cited by the Middle East news service Zawya, said Wednesday that the Central Bank of Iran was converting 45 billion euros of reserves into dollars and gold. The move “comes against a backdrop of a new phase of economic recession in Greece and Spain which has caused a drop in the value of the euro against the dollar in global markets,†the report said.
The backdrop was a lot different in April 2008 when Iran announced that it would no longer accept dollars in payment for its oil. The euro was worth about $1.60 at the time, close to its all-time high and on the brink of a huge decline.
Apparently having failed to learn any lessons from that experience, Iran’s president, Mahmoud Ahmadinejad, ordered last September that the country’s Oil Stabilization Fund, essentially an investment portfolio whose income is used to cushion the impact of fluctuations in oil revenues, be calculated in euros instead of dollars.
A report of the announcement said it was being taken “because the government wishes to protect itself from the fragility of the U.S. economy and the weak dollar.â€Â
That was near the end of a rally that had taken the euro to about $1.46. It crawled up another few cents before tumbling to just over $1.20, roughly where it sits now.
If Iranian officials are considering quitting their day jobs to play the foreign-exchange market, they should think again. They bet big against the dollar twice after major declines and just ahead of significant rallies.
The new trade in the opposite direction - out of euros and into the dollar and gold - is remarkable not just because it comes after one of the biggest plunges in the euro since it came into being in 1999, but because of Iranian leaders’ hatred of the United States. Their sentiments wouldn’t permit them to buy dollars - and pay top dollar for them - unless they were certain that the currency were heading a lot higher.
The move looks like just another case of horrendous timing, however, and could signal an imminent recovery in the euro.
http://moneywatch.bnet.com/investing/blog/against-grain/iran-bets-big-on-the-dollar-and-gold-so-you-dont-have-to/583/
A report by Agence France Presse, cited by the Middle East news service Zawya, said Wednesday that the Central Bank of Iran was converting 45 billion euros of reserves into dollars and gold. The move “comes against a backdrop of a new phase of economic recession in Greece and Spain which has caused a drop in the value of the euro against the dollar in global markets,†the report said.
The backdrop was a lot different in April 2008 when Iran announced that it would no longer accept dollars in payment for its oil. The euro was worth about $1.60 at the time, close to its all-time high and on the brink of a huge decline.
Apparently having failed to learn any lessons from that experience, Iran’s president, Mahmoud Ahmadinejad, ordered last September that the country’s Oil Stabilization Fund, essentially an investment portfolio whose income is used to cushion the impact of fluctuations in oil revenues, be calculated in euros instead of dollars.
A report of the announcement said it was being taken “because the government wishes to protect itself from the fragility of the U.S. economy and the weak dollar.â€Â
That was near the end of a rally that had taken the euro to about $1.46. It crawled up another few cents before tumbling to just over $1.20, roughly where it sits now.
If Iranian officials are considering quitting their day jobs to play the foreign-exchange market, they should think again. They bet big against the dollar twice after major declines and just ahead of significant rallies.
The new trade in the opposite direction - out of euros and into the dollar and gold - is remarkable not just because it comes after one of the biggest plunges in the euro since it came into being in 1999, but because of Iranian leaders’ hatred of the United States. Their sentiments wouldn’t permit them to buy dollars - and pay top dollar for them - unless they were certain that the currency were heading a lot higher.
The move looks like just another case of horrendous timing, however, and could signal an imminent recovery in the euro.
http://moneywatch.bnet.com/investing/blog/against-grain/iran-bets-big-on-the-dollar-and-gold-so-you-dont-have-to/583/