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Dollar rally continues

Agriculture.com Staff 12/17/2009 @ 1:34pm

The dollar has made a substantial rally so far this month. In three weeks, the dollar index has taken out the three month decline that occurred in September, October and November. Some of these short-covering moves in the dollar have been rather drastic, like today's action.

The grains and soy markets have responded in similar fashion. Unlike the positive moves in price that occurred so easily during the fall, today's markets had very sharp declines. Other factors which have been influencing price tend to take a backseat to the primary "factor of the day". So, concerns regarding supply (unharvested corn) and demand (bean buying by China) have faded from memory, at least for 24 hours.

There is a certain amount of this volatility that can also be described as "holiday trade" or more accurately, "prepare for the holiday trade". The next two weeks will feature shortened trading sessions, reduced volumes and a reduced flow of news. There may be no more nuggets of traditional fundamental news, unless the weather changes in South America, until the January 12th USDA reports.

Many market participants do not even try to multi-task during the holidays. They simply square up their positions and take a two week rest from trading to be with their families. Thin, volatile trading can occur and for farmers needing to adjust income or cash flows, there can be opportunities to make sales.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

The dollar has made a substantial rally so far this month. In three weeks, the dollar index has taken out the three month decline that occurred in September, October and November. Some of these short-covering moves in the dollar have been rather drastic, like today's action.

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