Daily Pfennig 4/27/09: US$ Benefits from the Swine Flu

Posted on

04/27/2009
A Pfennig For Your Thoughts

In This Issue…The story that is dominating the trading screens this morning is the outbreak of swine flu in Mexico, and the fear of it spreading into a pandemic. The flu has jumped off the North American continent and is now a global concern, with cases being reported as far away as New Zealand. President Obama’s administration has declared a public health emergency, with cases now being reported in several U.S. states. Hopefully health officials will be able to keep the virus somewhat contained, and this won’t become as predominate as the SARS outbreak.

As most would predict, the Mexican peso has dropped significantly, moving down almost 3% vs. the US$ overnight. Fears of a global pandemic have driven investors out of the high-yielding currencies of New Zealand, Australia, and Brazil. Risk aversion seems to be back in vogue, with investors moving funds back into U.S. Treasuries and the Japanese yen. I read a story over the weekend that suggested the US$ will continue to strengthen no matter what happens in the global economy. The story suggested that the US$ would increase if the administration’s efforts to stimulate our economy work, and we lead the rest of the globe into the recovery phase. On the other hand, the US$ will also strengthen if the global economy continues to weaken, as investors will purchase U.S. Treasuries as a safe haven. Continue reading at LINK

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