Interview: South Africa
>> the south african rand fell today on concern that slowing growth in the european union may erode demand for exports from africa’s biggest economy as oil prices climb. the rand’s 1.5% move was the biggest fluctuation of any primary currency in the world. south africa sells about 40% of its exports to the 12-nation euro region, its largest trading partner. south africa imports more than half the oil it consumes. every rise in the price of crude puts additional pressure on the south african economy. to see what’s happened with the rand over the past two years. the rand in white at the bottom of the screen, down 14% over the two-year period. oil, in the meantime, is the orange line. it has surged, more than doubled, up 103% over the past two years. recall, one of our top stories today, the surge in crude again today, closing above 59 barrels in new york trading, reaching a record high for a second straight day. turning our attention outside the markets where president bush says insurgents will not drive the u.s. out of iraq. mark crumpton joins us with more on the story. mark?
>> on a day when a car bombing at a police training center in irbil left over a dozen people dead, president bush promised that despite the violence, the united states will stay in iraq until the job is done. with more than 1,700 american troops dead in iraq, polls show voters have grown uneasy with the president’s policies and some in congress are pushing for a date certain when troops would begin withdrawing. following a white house meeting with european union leaders, the president said he hears and shares those concerns but that the u.s. will stay the course.
>> i think about iraq every day. every single
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Listen Interview: Senior currency trader
>> the dollar is headed for its biggest quarterly gain in four years and the u.s. dollar index, which measures the dollar’s value against a basket of six global currencies including the euro, yen and british pound, has gained 5.3% since the end of the first quarter, now up 9.5% so far this year. let’s take a closer look at where the dollar may be headed as we continue to look at the markets at midyear. we’re joined by brian taylor. brian is senior currency trader at manufacturers and traders trust in buffalo. we welcome you.
>> thank you very much for having me.
>> brian, do you think this is a new period of strength for the dollar, or is it a euro weakness story?
>> i believe this is a euro weakness story. if you look at the euro versus mostly all the other major currencies having their problems, also, against sterling. pound sterling is down. the yen is holding up―it’s hold willing against the yen. but against the canadian dollar, australian dollar, the euro is having its problems due to political, technical and fundamental and bad sentiment for the euro right now.
>> given that basket of news for the euro, how high are you forecasting the dollar can go against the euro?
>> it’s difficult to say right now, page because there -- mainly because there are a couple things pulling on the euro. obviously, structurally and politically, the e.u. was unable to reach a budget this weekend and given that bandwagon, you see also that the euro is having trouble economically where their numbers are coming in extremely poorly and technically speaking, the euro has turned the corner in that it’s developing technical pictures that are not positive for the euro right now.
>> in terms of the technicals, as you’ve mentioned that several times, what are the technical key triggers that could indicate further euro weak instance.
>> one thing we look at is the 200-day moving average which gives a very good indication of whether a currency is going to change the course it’s been going. right now, the 2 hand moving average with the euro―the 200 moving average with the euro is moving sideways. we moved sideways in 2001 to mid 2002 but we began another move up to 1.36. in addition, we saw well that move in 1999, 2000, when the euro did change from negative to positive and that 200-day moving average, that turn was the key indicator as to whether or not the euro had turned the corner.
>> what’s your top currency pick right now?
>> the commodity currency are doing extremely well. the australian dollar, new zealand dollar, canadian dollar, all doing well against the euro. and that’s what you have to look at, how are these currencies doing against the euro, not specifically the dollar. the relationships we’ve seen beforehand aren’t in play. we’ve seen the euro go down and canadian dollar strengthen against the u.s. dollar. the euro has gone down, also, but the australian dollar has held ground and the same can be said for the new zealand dollar. right now, the commodity currencies are doing well, but given the in fact we’ve reached a high in gold, copper and oil, it will be hard for that to sustain going forward.
>> are you still buying those plays?
>> we’re buying them against euros but in terms of against the dollar, the dollar is a hard play because everyone is trying to figure out what the federal reserve will do, when they’ll reach the end of their tightening cycle and because of these things going on in europe right now with the referendum and the e.u. this weekend and technical picture, i think the euro negative play is the play to make right now.
>> what did you make of warren buffett’s comments earlier today where he said longer term he anticipates the dollar will continue declining.
>> i think he’s looking at the very long term and the account t we still have imbalances with the current account, the trade balance, that is still extremely large. we had good news last week on the trade balance but all in all, we still need the dollar to decline to sustain our current account balance.
>> we are talking about the markets at midyear, looking ahead to the second half of the year. dollar-yen, what do you see in the second half?
>> we’re still looking at another retest of 110, 111 area with 105 being the level where i think the bank of japan draws their line in the sand again because we don’t want it to get down. last time i was on, we spoke about china and their revaluation so much will depend on what china does and the tone and the mood that the chinese government begins to give to the market .
>> brian, thanks so much for joining us.
>> thank you.
>> brian taylor, chief currency trader at manufacturers and traders trust. brian mentioned the federal reserve and its relationship to the dollar. fed chairman alan greenspan paying particularly close attention to prices at wal-mart. peter cook will explain coming up.
