America's Birthday Gift: A Surging Dollar

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July 5 (Bloomberg) -- BNP Paribas' Vassili Serebriakov,'s Jared Levy and Bloomberg's Michael McKee discuss the dollar with Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Happy 237th birthday, america.

The markets get, a surging dollar.

It is up against the euro and the yen as investors expect the u.s. to continue growing faster than the other major economies and we may pull back on tapering whereas the bank of japan, the european central bank and the bank of england might keep going.

How do you play it?

Michael mckee has the story.

The strategy and the trade.

Michael mckee, this is something you have been talking about all day.

It is a bizarre thing, but in the currency world we talked about current is getting stronger or weaker and weaker act like stronger is a good thing, but in this case not a good thing for the united states.

It means that it is harder to sell goods overseas and that can be a problem going forward.

The dollar is getting a boost , not only the idea the fed will taper earlier, but the more demand for imported goods.

We see the dollar higher against all major trading partners and it is not just the dollar index.

The trade-david dollar is taking -- trade-weighted dollar is taking a big leg up, meaning it will import some inflation into the country.

It is all because the european central bank, the bank of japan, the bank of england are all talking about he berates low or cutting -- keeping rates low or cutting them.

The silly , -- when i was in economics major at instant, alan blinder called it a macho theory.

What is your take on what all of this means?

I think it could be a concern down the road, but the answer depends on how many steps away from the charting board you take.

If you look at the u.s. dollar from a long-term perspective, we are at the end of a multiyear bear cycle that started in 2002. the dollar has been stronger this year though we are very far from a long term bullish dollar trend.

I think the divergence he -- divergence is key.

Things change fast on the foreign exchange markets, and it looks like the fed is really what is boosting the dollar, whereas the ecb the bank of england and the bank of japan are waiting on their currencies.

What do you tell clients?

Our current recommendations are it is a good moment to sell the euro.

I think markets are adjusting to the new ecb and the new ecb communication policy we heard yesterday.

With u.s. yields moving higher, the arguments are strong for that trade and we are still strong with the long dollar- yen.

There is probably not much more to come from the japanese side of the story, but with u.s. 10- year yields up that 2.7%, i think the long dollar-yen story is/. -- bullish.

Strong u.s. growth.

I like the sound of that.

Jerry leavy, you are the traitor.

Put a trade around everything michael mckee and vassili serebriakov are telling us.

I agree with the sentiment.

About one month ago, i was shorting the treasury with a puts bread and i am sticking with it.

I think it will remain positive with europe.

We are starting to talk about portugal and greece, and the headlines alone, even though they are miniscule, able drive euro lower, and my trade again is in the fx the.

-- fxe.

That is the etf for the euro, and if you are buying a spread, you are betting the euro is going down.


What i like is the fxe is like a stock.

It is a nice way for the average investor to participate.

Shorting the fxe means i believe the euro is going lower versus the dollar.

What i am looking at is the 1.33 puts bread in september.

I can do that for three dollars $.60. the most i can loses $360 per spread.

I believe the euro will continue to break down.

I see the fxe breaking down below a key level.

The reason i am using this red in -- the spread is anything can happen.

This is predicated on the u.s. news 12 continuing to be somewhat positive, which i believe -- the u.s. news flow continuing to be somewhat positive, which i believe it will be.

Vassili serebriakov , can you put numbers on the euro and the yen, where they are going against the dollar?

I think the euro is around 1.26. the downside is about 1.20. for the yen, most of the moves are in the past, but we are targeting about one -- $1.08 for dollar-yen.

It sounds like we should convince the boss is to set up shop in europe, it will be cheaper.

We can go all the -- all around the world, japan.

Vassili serebriakov, jerry leavy, michael mckee, thank you.

Coming up, hulu bidding wars and that dell dual drama.

Relax and enjoy the holiday weekend because monday second- quarter earnings season

This text has been automatically generated. It may not be 100% accurate.


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