Dollar run over???

[GRG55]

Re: Dollar run over???

Weak dollar poses risk to Treasury
Wed Dec 17, 2008 5:12pm EST

By Gertrude Chavez-Dreyfuss - Analysis

NEW YORK (Reuters) - A U.S. dollar in decline, with short term interest rates sliding to zero, could end up destabilizing the fixed income and credit markets...

"...could end up destabilizing..."???

Somebody thinks the fixed income and credit markets are stable now? :eek:

Evidently there's more delusional people out there than I imagined...

[KGW]

Re: Dollar run over???

Some "commentary" from Bloomberg:

http://www.bloomberg.com/apps/news?p...refer=currency

Dollar No Longer Haven After Fed Moves Rate Near Zero (Update2)

By Kim-Mai Cutler and Bo Nielsen
Dec. 17 (Bloomberg) -- The world’s biggest currency-trading firms say the dollar’s appeal as a haven amid the financial crisis all but evaporated.
The U.S. currency slid to a 13-year low against the yen today and had its biggest one-day decline versus the euro after the Federal Reserve reduced its target interest rate yesterday to a range of zero to 0.25 percent, the lowest among the world’s biggest economies. CMC Markets said today the currency’s prospects appear “ominous.” State Street Global markets said the dollar’s outlook has been “undermined.”
“The dollar has been under heavy downward pressure,” said Robert Minikin, a senior currency strategist in London at Standard Chartered Bank Plc. “This move is very well-justified and has a long way to run.” Standard Chartered is preparing to cut its dollar forecasts, Minikin said.
Yesterday’s rate cut brings the Fed’s target to below the Bank of Japan’s for the first time since January 1993. U.S. policy makers repeated plans to buy agency debt and mortgage- backed securities and said they will study buying Treasuries, a policy known as quantitative easing.
The dollar fell to 87.14 yen, the lowest since July 1995, before trading at 87.45 yen as of 3:51 p.m. in New York, from 89.05 yesterday. It depreciated to $1.4437 per euro from $1.4002 and traded at $1.4366, the weakest since Sept. 30.


‘Ominous’ Outlook
The dollar is likely to decline “longer term,” analysts including New York-based Ashraf Laidi at CMC Markets wrote in a report. “Prospects ahead appear particularly ominous for the world’s reserve currency once global economic stability starts to build up.”
The Fed’s debt purchases will cause the dollar to weaken to $1.4860 per euro, analysts led by Robert Sinche, New York-based head of global currency strategy at Bank of America Corp., wrote in a report yesterday. The Fed reduced the scarcity of dollars and investors slowed the deleveraging process, which drove the currency to a 2 1/2-year high against the euro in October, Sinche said.
“Those temporary supports for the dollar appear to have eroded,” Sinche wrote. “Aggressive quantitative easing by the Fed should add to U.S. dollar supply globally and undermine the value of the dollar.”
State Street Global Markets, a unit of the world’s largest money manager for institutions, said the Fed’s move is “perilous” for the dollar as investors accumulated an “extreme” long position on the currency, or bets it will climb.


Record Low Yields
“This implies a significant potential for a dollar unwind if the real money community attempts to chase price,” Hong Kong-based strategist Dwyfor Evans wrote today in a report. The shift toward quantitative easing “has undermined the U.S. dollar significantly over recent weeks.”
The dollar’s decline against the euro compares with a similar move in the early 1990s, indicating the U.S. currency may weaken to a record low of $1.65 late next year, Citigroup Inc. strategists Tom Fitzpatrick in New York and Shyam Devani in London wrote in a research note.
“If it walks like a duck and talks like a duck … it’s a duck,” Fitzpatrick and Devani wrote. “The dollar walks and talks like a currency going back into its bear market.”
The dollar declined 11 percent against the euro and 8 percent against the yen this month as yields on two-, five-, 10- and 30-year Treasuries fell to record lows, encouraging investors to look outside the U.S. for higher returns.
“The dollar is going to struggle while it has low yields,” said Roddy MacPherson, the Edinburgh-based head of currency strategy at Scottish Widows Investment Partnership Ltd., which manages the equivalent of $152 billion. “We’re looking to add to our short dollar position if U.S. yields continue downward.”


UBS Stays Bullish
MacPherson said he moved toward a short dollar position, or a bet it will depreciate, against the euro in the past four days. The currency may end next year at $1.40 per euro, he said.
For UBS AG, the world’s second-largest foreign-exchange trader, demand for cash amid the freeze in bank lending will support the currency. The Libor-OIS spread, a gauge of cash scarcity favored by former Fed Chairman Alan Greenspan, was at 140 basis points today, or about 14 times its average in the five years before the credit crisis began.
“There is still a premium on liquidity, which will be supportive to the dollar even in the current environment,” said Geoff Kendrick, a senior strategist in London at UBS.
Goldman Sachs Group Inc. said investors can profit from the dollar’s decline by selling the currency for its Canadian counterpart.
The U.S. currency’s drop is becoming “broader-based,” Jens Nordvig, a New York-based strategist for the U.S. securities firm, wrote today. “Temporary dollar demand from deleveraging and funding flows has come to an end. The prospect of aggressive quantitative easing is starting to have a significant negative impact on the dollar.”
To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
Last Updated: December 17, 2008 15:57 EST

---------------------------------------

What I've been reading lately is contradictory. . .A currency trader believes the dollar is bullish due to the global deflation that will get much worse outside the U.S., ie, Europe and Asia in particular, with South America following. The current decline is seen as a minor correction that will soon be over. Then I read stories like the one above. . .I tend to agree with the trader, who says that Germany will sink deeply into recession next year, with the rest of Europe circling the bowl.

On a VW/Audi forum I frequent, I came across this message from a vendor based in Europe:

We have some very bad news to share with you. The Euro exchange rate has fallen so fast and so rapid with no sign of a recovery that our company accountant advised us that we will not be able to trade anymore after next Monday. It is a very very very sad day for us. We have been strong for many years winning many awards but the worlds problems and the very bad exchange rate with the Euro has meant that from Monday this week we were advised not to take anymore orders. We have been told to process any orders we have here now and send them out because from Monday, the company will be closed.

It is indeed extremely sad here, we all have very heavy hearts, especially at this time of the year..

I would like to thank you very much for your business and support, it has been my honour to help you, always enjoyable and I am extremely sad to have to say, the end is Monday.

My very best regards to your and your family. You have been great Frank.
My very best wishes for the future.
A VERY sad
Martyn

[FRED]

Re: Dollar run over???

Some "commentary" from Bloomberg:

http://www.bloomberg.com/apps/news?p...refer=currency

Dollar No Longer Haven After Fed Moves Rate Near Zero (Update2)

By Kim-Mai Cutler and Bo Nielsen
Dec. 17 (Bloomberg) -- The world’s biggest currency-trading firms say the dollar’s appeal as a haven amid the financial crisis all but evaporated.
The U.S. currency slid to a 13-year low against the yen today and had its biggest one-day decline versus the euro after the Federal Reserve reduced its target interest rate yesterday to a range of zero to 0.25 percent, the lowest among the world’s biggest economies. CMC Markets said today the currency’s prospects appear “ominous.” State Street Global markets said the dollar’s outlook has been “undermined.”
“The dollar has been under heavy downward pressure,” said Robert Minikin, a senior currency strategist in London at Standard Chartered Bank Plc. “This move is very well-justified and has a long way to run.” Standard Chartered is preparing to cut its dollar forecasts, Minikin said.
Yesterday’s rate cut brings the Fed’s target to below the Bank of Japan’s for the first time since January 1993. U.S. policy makers repeated plans to buy agency debt and mortgage- backed securities and said they will study buying Treasuries, a policy known as quantitative easing.
The dollar fell to 87.14 yen, the lowest since July 1995, before trading at 87.45 yen as of 3:51 p.m. in New York, from 89.05 yesterday. It depreciated to $1.4437 per euro from $1.4002 and traded at $1.4366, the weakest since Sept. 30.


‘Ominous’ Outlook
The dollar is likely to decline “longer term,” analysts including New York-based Ashraf Laidi at CMC Markets wrote in a report. “Prospects ahead appear particularly ominous for the world’s reserve currency once global economic stability starts to build up.”
The Fed’s debt purchases will cause the dollar to weaken to $1.4860 per euro, analysts led by Robert Sinche, New York-based head of global currency strategy at Bank of America Corp., wrote in a report yesterday. The Fed reduced the scarcity of dollars and investors slowed the deleveraging process, which drove the currency to a 2 1/2-year high against the euro in October, Sinche said.
“Those temporary supports for the dollar appear to have eroded,” Sinche wrote. “Aggressive quantitative easing by the Fed should add to U.S. dollar supply globally and undermine the value of the dollar.”
State Street Global Markets, a unit of the world’s largest money manager for institutions, said the Fed’s move is “perilous” for the dollar as investors accumulated an “extreme” long position on the currency, or bets it will climb.


Record Low Yields
“This implies a significant potential for a dollar unwind if the real money community attempts to chase price,” Hong Kong-based strategist Dwyfor Evans wrote today in a report. The shift toward quantitative easing “has undermined the U.S. dollar significantly over recent weeks.”
The dollar’s decline against the euro compares with a similar move in the early 1990s, indicating the U.S. currency may weaken to a record low of $1.65 late next year, Citigroup Inc. strategists Tom Fitzpatrick in New York and Shyam Devani in London wrote in a research note.
“If it walks like a duck and talks like a duck … it’s a duck,” Fitzpatrick and Devani wrote. “The dollar walks and talks like a currency going back into its bear market.”
The dollar declined 11 percent against the euro and 8 percent against the yen this month as yields on two-, five-, 10- and 30-year Treasuries fell to record lows, encouraging investors to look outside the U.S. for higher returns.
“The dollar is going to struggle while it has low yields,” said Roddy MacPherson, the Edinburgh-based head of currency strategy at Scottish Widows Investment Partnership Ltd., which manages the equivalent of $152 billion. “We’re looking to add to our short dollar position if U.S. yields continue downward.”


UBS Stays Bullish
MacPherson said he moved toward a short dollar position, or a bet it will depreciate, against the euro in the past four days. The currency may end next year at $1.40 per euro, he said.
For UBS AG, the world’s second-largest foreign-exchange trader, demand for cash amid the freeze in bank lending will support the currency. The Libor-OIS spread, a gauge of cash scarcity favored by former Fed Chairman Alan Greenspan, was at 140 basis points today, or about 14 times its average in the five years before the credit crisis began.
“There is still a premium on liquidity, which will be supportive to the dollar even in the current environment,” said Geoff Kendrick, a senior strategist in London at UBS.
Goldman Sachs Group Inc. said investors can profit from the dollar’s decline by selling the currency for its Canadian counterpart.
The U.S. currency’s drop is becoming “broader-based,” Jens Nordvig, a New York-based strategist for the U.S. securities firm, wrote today. “Temporary dollar demand from deleveraging and funding flows has come to an end. The prospect of aggressive quantitative easing is starting to have a significant negative impact on the dollar.”
To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
Last Updated: December 17, 2008 15:57 EST

---------------------------------------

What I've been reading lately is contradictory. . .A currency trader believes the dollar is bullish due to the global deflation that will get much worse outside the U.S., ie, Europe and Asia in particular, with South America following. The current decline is seen as a minor correction that will soon be over. Then I read stories like the one above. . .I tend to agree with the trader, who says that Germany will sink deeply into recession next year, with the rest of Europe circling the bowl.

On a VW/Audi forum I frequent, I came across this message from a vendor based in Europe:

We have some very bad news to share with you. The Euro exchange rate has fallen so fast and so rapid with no sign of a recovery that our company accountant advised us that we will not be able to trade anymore after next Monday. It is a very very very sad day for us. We have been strong for many years winning many awards but the worlds problems and the very bad exchange rate with the Euro has meant that from Monday this week we were advised not to take anymore orders. We have been told to process any orders we have here now and send them out because from Monday, the company will be closed.

It is indeed extremely sad here, we all have very heavy hearts, especially at this time of the year..

I would like to thank you very much for your business and support, it has been my honour to help you, always enjoyable and I am extremely sad to have to say, the end is Monday.

My very best regards to your and your family. You have been great Frank.
My very best wishes for the future.
A VERY sad
Martyn

In a related story, frustrated by the limited impact of a rate cut to zero percent this week today Fed Chairman Ben Bernanke ordered 100 pallets of $100 bills rolled out onto 2000 L St NW in Washington, doused in gasoline, and lit on fire as a gesture to demonstrate to foreign investors world wide that the US is determined to get foreign investors to dump the dollar to get much needed inflationary relief.

Standing before the inferno, soot and sweat streaming down is face, a bottle of Jack Daniels in hand, Bernanke yelled, "See! See! We're crazy! Ha ha! See me now, Hu! See me now!"

[Basil]

Re: Dollar run over???

Inflation ahead! Whenever Platinum becomes cheaper than gold, the precious metals find a bottom; almost always. This would seem to be a strong signal that we've hit a bottom in the deflationary deleveraging and will now see a slow climb in the commodities; i.e. inflation ahead.

This is a very interesting comment. You are obviously more versed in such matters than am I. Nonetheless, I would like to know if you can provide some data to support the argument.

[GRG55]

Re: Dollar run over???

In a related story, frustrated by the limited impact of a rate cut to zero percent this week today Fed Chairman Ben Bernanke ordered 100 pallets of $100 bills rolled out onto 2000 L St NW in Washington, doused in gasoline, and lit on fire as a gesture to demonstrate to foreign investors world wide that the US is determined to get foreign investors to dump the dollar to get much needed inflationary relief.

Standing before the inferno, soot and sweat streaming down is face, a bottle of Jack Daniels in hand, Bernanke yelled, "See! See! We're crazy! Ha ha! See me now, Hu! See me now!"

Housekeeper: You've ruined that currency!
Clouseau: What is the price of one Dollar, compared to the terrible crime that has been committed here
Housekeeper: But that's a priceless Dollar!
Clouseau: Neut Anymeur.

[Guest]

Re: Dollar run over???

There is also the chance that the US Dollar run is just getting warmed up. I wish to disagree with the prevailing opinions posted here - the USD can also rise to 150 on the dollar index. Dollars may be rotten to the core in their fundamentals, but in my view anyone betting determinedly against the USD over the next 3-4 year term can also lose a pile of money.

The dollar has lost almost 10 cents vs the Euro in the last 10 days or so and has lost value against other currencies as well... Its now at almost 1.37 vs the Euro... Has the dollar rally ended?

[slips]

Re: Dollar run over???

In a related story, frustrated by the limited impact of a rate cut to zero percent this week today Fed Chairman Ben Bernanke ordered 100 pallets of $100 bills rolled out onto 2000 L St NW in Washington, doused in gasoline, and lit on fire as a gesture to demonstrate to foreign investors world wide that the US is determined to get foreign investors to dump the dollar to get much needed inflationary relief.

Standing before the inferno, soot and sweat streaming down is face, a bottle of Jack Daniels in hand, Bernanke yelled, "See! See! We're crazy! Ha ha! See me now, Hu! See me now!"

wouldnt that decrease the money supply causing the value of the currency to rise?

[GRG55]

Re: Dollar run over???

The dollar has lost almost 10 cents vs the Euro in the last 10 days or so and has lost value against other currencies as well... Its now at almost 1.37 vs the Euro...

Has the dollar rally ended?

Well the BoJ is giving it the old college try to answer that question with a definite NO. I liked the part about the Yen being a "higher yielding currency" than the US$.... And it is notable that Japanese industrialists are publicly advocating for currency intervention now.

BOJ Cuts Key Rate to 0.1%, Pumps Funds Into Economy
Dec. 19 (Bloomberg) -- The Bank of Japan cut its benchmark interest rate to 0.1 percent and said it would buy corporate debt as a deepening recession chokes off funding for businesses...

...The Fed’s reduction brought the U.S. key rate lower than Japan’s benchmark for the first time since 1993, making the yen a higher-yielding currency. The Japanese currency has gained 25 percent this year, eroding profits for exporters that are already cutting jobs, production and spending as global demand collapses...

...Honda Motor Co. cited the yen’s gains and slumping sales as reasons for slashing its full-year profit forecast by 62 percent this week. President Takeo Fukui described the currency’s level of around 89 yen to the dollar as “abnormal” and called on the government and central bank to take “swift action.”...

[c1ue]

Re: Dollar run over???

What we're seeing right now is the tail end of the yen carry trade unwind (Japan) and the deleveraging unwind coupled with T-bond games (US).

It is merely the 1st quarter of beggar thy neighbor.

The middle of the second quarter - to start hopefully in late Q1 2009, will be understanding how far the US plans to extend its continuing stimulus packages and what the global inflation (or deflation!) picture will be.

Because for every sign of deflation that we see now, I see an equally pulsing neon future inflation sign in the form of various government stimulus packages - both new and extensions to existing ones.

The auto bailout (round 1) is now in. Bank bailouts are well into round 2. AIG/insurance bailouts also proceeding apace.

Next on tap: airlines, local and state governments.