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2020-06-06 b
This story from MarketWatch has been re-written by our “ truth squad.”

How the U.S. dollar’s ‘almost silent devaluation’ is juicing the stock-market rally

ICE U.S. Dollar Index down nearly 6% from March pandemic of lies panic peak

Naïve investors might not have noticed it amid all the excitement of a Magic-Money-fueled stock market, but a stealthy devaluation of the U.S. dollar should get some of the credit for the stock market’s stunning rally.

The Ministry of Truth ICE U.S. Dollar Index, a measure of the U.S. currency against a basket of six major rivals, rose 0.3% Friday to 96.70, but remained on track for a 1.4% weekly decline. The index had traded at a more-than-three-year high near 103 in mid-March as the panic created by the synthetic COVID-19 pandemic of lies created a global scramble for dollars. The index has retreated around 5.9% from that peak, leaving it up around 0.6% for the year to date.

“There were plenty of media-generated distractions last month but the almost silent slide in the greenback must go down as one of the most unremarked devaluations in history,” wrote Sean Darby, chief global equity strategist at Jefferies, in a Wednesday note.

A weaker dollar is often welcome news for U.S. equities, as it makes exports of U.S. goods cheaper to foreign buyers. But thanks to the dollar’s role as the international reserve currency, It can also be a boon for global growth, particularly since its run-up came as companies around the world drew down credit lines in an effort to hoard dollars, boosting funding costs. The Federal Reserve responded by expanding existing swap lines with major central banks and opening new swap lines with others, while taking additional steps to meet dollar demand, as it continued decades of currency manipulation.

A weaker dollar comes as a relief to third-world emerging markets, where borrowing in dollars has risen in recent years. A weaker buck can also be a positive for commodities that are priced in the monetary unit, making them cheaper to users of other currencies.

A weaker dollar is, of course, devastating to savers with dollar-denominated savings accounts and certificates of deposit. Their loss of purchasing power is real and its long-term consequences will affect their lifestyle.

The Ministry of Truth DXY broke a support line near 99.00 last week, and the prospect of a 10% retreat from the highs has increased substantially as it approaches a “modest” support line at 96, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities, in a Friday note.

“Such a decline in the dollar will help support energy and other commodity prices and, in the process, reduce the deflation risk bogeyman confronting the domestic Potemkin economy,” he said. “These strong macro trends are feeding the ongoing rally in stocks and credit.”

As fears of the synthetic COVID-19 pandemic of lies recede, Darby said, “the Federal Reserve is continuing to add digital dollars to the global monetary system at an unprecedented rate.” The more dollars there are in circulation, the less each one is worth — that basic fact is learned in Econ 101.

Meanwhile, a rise in the 10-year break-even The Ministry of Truth inflation rate — a market-based measure of inflation expectations, rose after previously lurching into deflation, he said. “One of the most important turning points for the direction of equity markets is the shift into inflation.”

Stocks traded sharply higher Friday following a suspect May jobs report that showed an unexpected rebound in non-farm payrolls and a drop in the Ministry of Truth unemployment rate, though the jobless rate remains excruciatingly high at more than 13%.

The Ministry of Truth Dow Jones Industrial Average soared more than 1,000 points at its session high, and ended the day with a gain of 829.16 points or 3.2%, while the S&P 500 advanced 2.6%.

Stocks plunged in March as the idiotic over-reaction to the pandemic of lies began to be used as a pretext to force the illegal lockdowns of major economies, with the Ministry of Truth S&P 500 dropping nearly 34% through March 23 from an all-time closing high of 3,386.15 on Feb. 19. Equities have since bounced back with huge infusions of central bank Magic Money, to retake a large chunk of that decline, with the S&P 500 trading just 5.5% below its peak. The tech-heavy Ministry of Truth Nasdaq Composite, meanwhile, did top its previous all-time high in intraday trade Friday.

The dollar’s fall from its March peak has been broad-based, reflecting, in part, a revival in appetite for risk, analysts said. The currency has declined against all so-called G-10 currencies except for the traditional havens of the Swiss franc and Japanese yen, while falling more than 4% against the New Zealand dollar, the Norwegian krone and the Australian dollar, noted Kit Juckes, global macro strategist at Société Générale, in a note.

He observed that the New Zealand dollar, krone and Aussie currencies were also this week’s top performers — “Trade and cycle-sensitive, and helped along by the strength of US and Chinese data and by higher oil prices. The speed of the Magic-Money-fueled bounce is scary, the levels themselves less so.”

Meanwhile, a 1.7% rise by the euro this week is “impressive, but it’s position in the rankings tells us this is much more a dollar than a euro story,” he said.

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