Dollar Falls After Bernanke Signals Downside Risks to Growth

Discussion in 'Wall St. News' started by S2007S, Nov 8, 2007.

  1. S2007S


    Dollar Falls After Bernanke Signals Downside Risks to Growth

    By Min Zeng

    Nov. 8 (Bloomberg) -- The dollar fell to near a record low against the euro after Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is likely to ``slow noticeably,'' raising speculation of a third interest-rate cut this year.

    The U.S. currency touched the weakest since 1981 versus the pound and the cheapest since 1995 against the Swiss franc as slowing growth dimmed the allure of U.S. assets. The dollar's decline started after the European Central Bank and the Bank of England kept their borrowing costs unchanged today.

    ``The dollar will continue to lose its appeal,'' said Robert Fullem, vice president of U.S. corporate currency sales at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``Bernanke's crystal ball is foggy. The growth picture is worrisome and the Fed needs to cut rates further.''

    The dollar fell to $1.4691 per euro, from $1.4637 yesterday, at 10:57 a.m. in New York. The dollar touched $1.4731 yesterday, the weakest since the European currency started trading in January 1999. The U.S. currency traded at 112.68 yen from 112.63. The dollar dropped to as low as $2.1117 per pound and 1.1254 Swiss franc. The euro rose 0.4 percent to 165.57 yen.

    Brazil's real led the advance among the 16 most-actively traded currencies against the dollar, followed by Norway's krone. Canada's dollar rose 0.5 percent as rising oil and gold prices boost the nation's commodity exports.

    The Chinese yuan climbed 0.3 percent to the highest since the central bank ended a decade-long dollar peg in July 2005. Chinese officials yesterday said the country plans to diversify its $1.43 trillion in foreign-exchange reserves, causing a sell- off in the dollar.

    The yuan climbed to as high as 7.4211 versus the dollar, from 7.4421 yesterday.

    `Slow Noticeably'

    ``Overall, the committee expected that the growth of economic activity would slow noticeably in the fourth quarter,'' Bernanke said in prepared remarks to lawmakers at a hearing of the congressional Joint Economic Committee. High commodity prices and a weaker dollar may stoke inflation ``for a time,'' he said.

    The Fed has reduced borrowing costs twice since September as losses from credit markets widened amid the biggest housing slump in 16 years. The Fed reduced its target overnight lending rate between banks to 4.5 percent last week. Interest-rate futures traded on the Chicago Board of Trade show 76 percent odds the central bank will cut again in December.

    The dollar has dropped against 15 of 16 most-actively traded currencies this year, losing 10.2 percent against the euro, 7.2 percent versus the pound and 5.4 percent against the yen.

    Synthetic Euro

    The dollar also fell this week to an all-time low against the synthetic euro, a theoretical value for where the currency would have traded before its inception. The prior record was $1.4557 set in 1992.

    French President Nicolas Sarkozy yesterday told the U.S. Congress that the Bush administration must stem the dollar's plunge or risk a trade war. The rising competitiveness of U.S. exports helped shrink the nation's trade deficit to $57.6 billion in August, the smallest since January.

    The yield advantage of two-year German bunds over comparable-maturity Treasuries widened to 0.34 percentage point, near the most since April 2004. A widening spread boosts the allure of European debt relative to that of the U.S.

    Europe's single currency will trade at $1.44 versus the dollar by year-end, according to the median forecast of 42 analysts and brokerages surveyed by Bloomberg News.
  2. S2007S


    He knew this months ago, every meeting he talked about moderate growth in the economy now all of the sudden he is changing his views. Did he actually think there was no such thing as a housing downturn or a credit bubble, its been known for nearly a year now. Did he think that throwing money at the problem was going to fix it...............just keep cutting the rates to prop the markets higher.

    Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is likely to ``slow noticeably,'' raising speculation of a third interest-rate cut this year.
  3. Helicopter Ben does it again.

  4. not a big deal

    Falling dollar very good for tech companies and exporters.

    The fed will continue to cut rates and the US economy will continue to plug along.
  5. And the dollar continue to fall. Real income fall. Continue to push housing higher.
  6. And the market rebounds

    I'm not alone in my opinion. The big money guys who move the market also agree with me.
  7. Adobian


    I don't get it. Why aren't you guys selling the dollars against other currencies ? Isn't it easy money ?

    What are you guys doing trading stocks ? Jump into Forex immediately.