Dollar strength may impact risky assets: Richard Ross

Below is an edited transcript of his interview. Watch the accompanying video for more.

Q: What did you make of the market movement? Rather slow but focus remains Europe with Angela Merkel sounding that word of caution saying that this is the continent’s toughest hour since World War II?

A: Yes, we are seeing some selling here. Last Friday we had a very nice up day. What Warren Buffett said – IBM, one of the big gainers after Berkshire Hathaway took a 5% stake of roughly USD 10 billion plus. IBM is a USD 220 billion company. Of course, the fact that Berkshire had already amassed this position largely a counter that 29% year to date gain in IBM is the single best performing stock in the Dow Jones industrial average.

A couple of other big gainers like Caterpillar Inc which has been added as a high conviction idea at Goldman Sachs. This stock is up 42% from just October 4 so let’s take that upgrade with a grain of salt. Finally, to the upside we have Boeing, the big gainer in the Dow of over 2%, some very bullish comments out of that air show in Dubai where getting the largest civil jet order of almost USD 26 billion from Emirate Airlines. There are your three winners.

When you talk about the losers on the other end of the spectrum we are clearly talking about financials down across the board eluded to Bank of America, JPMorgan, Citi Group, Goldman Sachs down 2-3%. You really want to watch those financials which is speaking directly to what is going on in Europe, their exposure to the sovereign debt, their exposure to the global markets in general. So financials leading us to the downside, somewhat mixed on the big indexes today.

Q: A lot is happening in the currency space. President Barack Obama lashed out at Chinese authorities over the alleged undervaluation of the Chinese currency. On the other hand, you have the euro reacting to the Italian borrowing costs increasing. How are you reading the currency space?

A: Broad based strength in the dollar. This is one of my favorite calls being bullish on the dollar. You are back above that 50 day moving average (DMA) that dollar index which is a basket of six currencies. The dollar is higher against each and every one of those currencies save the Japanese yen which seems to have a mind of its own. It has been going up for the last 30 years. Broad base strength in that dollar, we are selling that euro.

This is the score keeper for the sovereign debt crisis the fact that Obama is kind of rattling the cage in here is just adding fuel to the fire. Investors are seeking the dollar today, they are selling just about every emerging and developed currency that I follow including the rupee which continues to move higher above that key 50 level. So watch that dollar strength that could have bearish implications for other riskier assets like stocks and commodities.