King dollar and global currency

The Indian rupee will be victim of Fed tightening and offshore fund liquidation on Dalal Street.

There is no doubt in my mind that we are only in the first year of a secular US dollar uptrend reminiscent of the Clinton superdollar of the late 1990s, a period that saw Russia default, Thailand lost its baht peg, Indonesia went bankrupt, South Korea begged for a $57 billion IMF loan, crude oil plunged to $10 and capital surged into Silicon Valley. Déjà vu? Yes. The world of late 2015 looks eerily similar to me since monetary divergence between the Yellen Fed and the Draghi ECB guarantees the epic fall in the euro, flagged in my strategy columns at 1.3650 in spring 2014, will continue next year. US economic growth and US Treasury-German Bund spreads mean the euro could well full to Wim Duisenberg levels well below 0.96 as the Fed begins its first interest rate tightening cycle since 2004-2006.
While the Fed exhibits public angst about Chinese/emerging market woes, the logic of the dual mandates guarantees a December FOMC rate hike, even if the money markets assign only a 60 per cent probability (Chicago Fed Funds futures) that Yellen will make her move. The proof of the rate hike pudding now lies in tasting the October and November non-farm payrolls data. An unemployment rate below five per cent will resurrect the Chicago bond vigilantes of the 1990s and lend to a quantum increase in "behind the curve" pleas for Fed tightening. My message to the "one and done" crowd among my tribe of Fed watchers and currency traders? Dream on, duckies.
The ECB policy conclave in December will set the operational metrics of its quantitative easing and euro money market intervention regime. This means a replay of Q1 2015 as Planet Forex aggressively bids down the euro to well below parity. Sentiment, positioning, politics (the migrant crisis, the end of Frau Merkel, Kremlin intervention in Syria, VW scandal, Deutsche Bank losses) all tell me that the euro is vulnerable to spasms of selling. I expect a 1.04-1.12 trading range till Christmas.
Sterling's tight range and high volatility has made it profitable to sell straddles, even if this strategy not for those who cannot manage options delta/gamma risks in real time. Mark Carney is the "unreliable boyfriend" but he cannot ignore wage inflation risk and the most robust consumer/home mortgage credit cycle since RBS, Lloyds and Barclays almost went bust in 2008. Chicago futures markets data tells me that investor nibble at sterling longs at .52, though lower highs on cable since summer make me nervous as King Dollar will not spare even the Great Britain pound. Best to go long sterling against petrocurrencies and the euro. With negative Swiss interest rates out to 10 years, the Swiss franc is priced for deflation and headed to 1.04 against the greenback.
If iron ore prices fall below $49 per metric tonne amid low cost supply surge from BHP, Fortescue, Vale and Rio amid a collapse in China steel demand, I see no reason why the Australian dollar cannot revisit post Lehman lows below 0.63 cents. Mining capex is a disaster, even the Chinese Politburo now slashes its public GDP growth forecast, the RBA is on hold and offshore sovereign wealth funds liquidate unhedged Aussie dollar government debt now that it is no longer "high yield".
Abenomics has only one real convincing arrow and that single arrow is the Bank of Japan's quantitative easing programme, the most aggressive relative to GDP on earth at ¥80 trillion per month. Abe and Kuruda-san know that there is zero chance that the Bank of Japan will hit its two inflation target in 2016. This means yen 126.The Trudeau loonie is toast in 2016 as I position for a 1.28-1.40 trading range.
The Indian rupee will be victim of Fed tightening and offshore fund liquidation on Dalal Street. While the rupee was spared the free fall of the Turkish lira or the ringgit/real/rupiah/rand relative inflation rates alone argue for 68 against the US dollar in the next six months. Capital flight, sanctions, external debt redemptions, crude oil, Syrian/Ukraine geopolitical risk all tell me the Russian rouble will fall to 72-74 by early 2016. Brazil President Dilma Roussseff's approval rating is below Brazil's inflation rate.
Gold? Down $80 an ounce on the eve of Diwali as petrocurrency-central banks dump reserves to service external US dollar debt while Chinese/Indian bullion demand evaporates. Gold is down 40 per cent since 2011. Sublime store of value, Sirji!