Yes, they do ring a bell at the bottom of the market.That was when the usual suspects in the brokerage business revised their 2015 Euro forecast down to 80 to the dollar. Don’t count on it.

Reorient Group (Hong Kong) notes that net foreign purchases of US securities averaged negative $50 billion during the past three months, the worst result since February 2009, at the peak of the financial crisis. The expensive dollar “has priced foreign investors out of the US,” Reorient says, in an eerie parallel to the dollar runup during the financial crisis–which was followed by a dollar bust. Here is a screen shot of the chart from Reorient’s April 19 Compass:

Meanwhile the dollar’s surge has contributed to unexpected economic weakness in the US and unexpected economic strength in Europe. Westpac Bank’s index of economic surprises (deviation of actual data from the consensus forecast) shows big declines for the US and big improvement in Europe.

Today’s blowout number was the German ZEW Assessment of Economic Conditions, which showed the strongest upturn since 2010, as well as the biggest upside surprise.

The strong dollar is shifting output from the US to its trading partners–and eventually this shift in real economic output will have an impact on currencies. The dollar’s 25% run from the end of June to its March 13 peak depended on two assumptions: US interest rates would rise as the Fed tightened, and European interest rates would fall under the European Central Bank’s quantitative easing campaign. With US data disappointing daily, the Fed’s tightening is being pushed out to the Greek Calends.

Asia Unhedged doesn’t exclude more dollar strength, but it is no longer a one-way bet.

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