ECON Dollar's latest rise - a speculation

I just wanted to throw this back-of-the-envelope musing out there for some other Econ musers and musettes to comment upon.

Last week, crude oil ( USO ) started down at a pretty fast, almost startling rate, for whatever reasons. This has continued into this week, with good momentum. Starting Monday, right after Washington Mutual's bombshell $8.3 Billion mortgage-related loss, when the Dollar should have begun to reel and stagger under the realization that interest rates simply cannot be raised now, and in the context of Fannie's and Freddie's dilemma, suddenly the Dollar starts straight up, and hasn't looked back since 71.40 USDI.

Can it be that foreign investors, primarily governments, are buying Dollars to accumulate until Oil hits what they believe to be a low, this becomes their strike price, and then they hit oil hard and fast with Dollars at a much-reduced price, yet with appreciated Dollars ? I know this would eventually result in a return to the old equilibriums, but the early players would benefit amazingly well for awhile. I'm trying to figure out some rationale for the puzzling countertrend moves in the Dollar, and to some degree in Oil ( though it is highly sensitive to news, I realize ).

Or, did I just miss some major key news, and I deserve a rap in the forehead ?

There has been talk of a timetable for withdraw of troops from Iraq. A U.S. withdrawal sends a clear signal that the U.S. will slow its spending, putting less pressure on the dollar.

Maybe ??

OK, the timing's about right, Hacker, for that to be a factor. So, there's 2 hypotheses for the inexplicable, now. Others ?

My guess is that with the bail out of Freddie and Fannie the Chinese and Russians aren't going to dump their dollars. They have a lot invested and the bail out was for the foreign investors and not the American peeps.

With the bail out, the speculation of the 'dump' was put to rest.
But, I think we need to brace for the hyper inflation the unbridled money presses are going to create.

We're burned either way.

This is just a short reprieve to let the scoffers let their guard down.

Those are my two cents.

Hacker said:

There has been talk of a timetable for withdraw of troops from Iraq. A U.S. withdrawal sends a clear signal that the U.S. will slow its spending, putting less pressure on the dollar.

Maybe ??

Click to expand...

I'm wondering how much we are spending these days in Iraq?