The sharp rally in the dollar index this week is causing more uncertainty for ag commodity exports and markets, Jerry Gulke, president of The Gulke Group, said in Friday’s broadcast of Weekend Market Report.
“We get through with weather, and now we have to be financial experts in order to manage this market,” he said.
The U.S. dollar index rallied sharply on Thursday and Friday to end the week at 97.03, which is the highest close since mid-August. A year ago, the U.S. dollar index was valued at 85.70.
“It doesn’t bode well for us, but it says that it will cost them more of their currency to buy the dollars to buy our grains,” Gulke explained.
The CME December corn contract finished 3 cents higher on the week at $3.79¾ per bu., November soybeans were 2¾ cents lower at $8.95½ per bu., and Chicago wheat’s December contract was down 1¾ cents for the week at $4.90½ per bu.
The rally in the dollar index this week followed comments made by the president of the European Central Bank on Thursday who hinted at cheapening the value of the euro to help boost European exports and grow the European economy, Gulke said, which sparked fears of a global currency war unfolding.
The president’s comments, Gulke noted, were in response to the U.S. Federal Reserve’s decision to not raise interest rates in September, which threw a curve ball into the European Central Bank’s plans since the European bank had anticipated the Fed to raise rates.
“That’s what turned this market around – that market anticipation that we’re into a currency war between the people that determine the money supply and interest rates, and that just puts a lot of uncertainty into it,” Gulke said.
Listen to his full comments here:
“I don’t know if we want to play that game with the rest of the world to see who can get the cheapest currency,” Gulke said. “But it looks like that’s back on track again.”
The sharp rally in the dollar dampens hopes for a post-harvest rally in the wheat, soybean, corn cattle and hog markets, he said, as those commodities become less competitive on the export market.
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