PFA Pioneer Blog
Dollar best house in bad neighborhood
Nov 08, 2013
Pro Farmer Extra
- From the Editors of Pro Farmer newsletter -
November 8, 2013
Note: The following is from this week's issue of Pro Farmer newsletter and was written by Pro Farmer Editor Chip Flory.
U.S. dollar may be the best house in a bad neighborhood
The U.S. dollar and Europe’s euro have been exchanging “leadership” in global currency trade for about five years. Financial scares here send the dollar’s value lower while lifting the euro’s value. Conversely, Europe’s financial issues quickly send the euro lower while supporting the value of the dollar.
The U.S. passed the baton to Europe during October’s government shutdown and financial stresses, but Europe passed it back to the U.S. last week when European Central Bank President Mario Draghi announced a cut to the benchmark refinancing rate to 0.25% (from 0.5%). Low inflation and fears of deflation in Europe were incentive for the unexpected interest rate cut. The interest rate cut dropped the value of the euro by more than 1% against the U.S. dollar.
Even with new lows in corn futures, the dollar’s decline helped limit harvest-season price pressure and helped November soybeans hold above $12.50. That’s because the dollar’s value helped make U.S. corn and soybeans even cheaper for importers, resulting in a solid string of strong export sales. Now with Europe’s economic concerns and an improved chart picture for the U.S. dollar index, dollar strength could make it difficult to lock in a harvest low.
Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory
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