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Dollar Falls To Two Month Low Against Yen on Mortgage Concerns

  1. All those who said subprime wasn't a big deal are idiots and know who they are because they still say the same thing even with all the evidence of what's happening out there.

    Here's another article that should make people think. But, as usual, many can't and won't:



    By Aaron Pan and Ron Harui
    Enlarge Image
    A U.S. one dollar bill is photographed with yen and euros

    July 24 (Bloomberg) -- The dollar declined to the lowest in more than two months against the yen and weakened against the 10 most-active currencies on speculation subprime mortgage losses will deepen and reduce demand for U.S. assets.

    The slide accelerated after the dollar reached levels that triggered automatic orders to sell. The dollar fell to a 26-year low against the pound and the weakest since March 1985 versus New Zealand's currency. The subprime rout is spreading with Basis Capital Fund Management Ltd., an Australian hedge fund, hiring Blackstone Group LP to advise on limiting its losses.

    ``The subprime market is a concern and the U.S. economy is going to be slower than anticipated,'' said Paul Chertkow, head of currency strategy at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. ``There's no good reason to think the dollar's going to appreciate.''

    The U.S. currency dropped to 120.41 yen, the weakest since May 16, before trading at 120.76 at 7:24 a.m. in New York from 121.09 late in New York yesterday. It also touched $2.0654 versus the pound, the lowest since May 1981. It was at $1.3809 per euro from $1.3807.

    The yen's advance accelerated after it reached 120.90 versus the dollar, where there were orders to buy the Japanese currency, said Akihiro Tanaka, a senior dealer in Tokyo at Resona Bank Ltd. The yen may rise to 120.30, Tanaka said.

    The yen gained against the 16 most actively traded currencies on speculation losses from subprime mortgages will prompt investors to sell riskier assets funded by borrowing cheaply in Japan, known as carry trades.

    Dollar Negative

    At least 35 bond and loan deals worldwide have been pulled, delayed or restructured in the past five weeks as a result of turmoil in credit markets caused by losses in U.S. subprime mortgage securities.

    Sydney-based Basis Capital said it hired Blackstone after two of its funds ran into trouble by investing in the unrated, riskiest portions of so-called collateralized debt obligations. These portions are first in line for any losses when borrowers fall short on mortgage payments.

    Japan's nine biggest banking groups have more than 1 trillion yen ($8.3 billion) of combined holdings in products backed by U.S. subprime mortgages, Nikkei News reported.

    ``The housing market has yet to hit bottom,'' said Antje Praefcke, a currency strategist at Commerzbank AG in London. ``The widening of U.S. credit spreads continues to eat away at dollar support.''

    An index of the dollar's value against six major currencies was near the lowest since 1995. A further slump may erode demand for U.S. securities from some investors abroad, according to Adam Cole, a senior currency strategist at RBC Capital Markets Ltd. in London.

    Foreign Investment

    ``While some investors will see U.S. assets as increasingly attractive because the dollar's drop makes them cheaper, others will be worried about the continued downtrend,'' Cole said. ``Until we know where we are with subprime, the risks are to the downside for the dollar.''

    Direct investment by foreigners into U.S. businesses and real estate fell to $22.9 billion in the first quarter, the lowest in almost two years and about 50 percent of the year- earlier period, according to the Bureau of Economic Analysis.

    Against its New Zealand counterpart, the U.S. currency was the weakest since the Asia-Pacific currency was freely traded 22 years ago, reaching 81.10 cents. Australia's dollar reached 88.63 U.S. cents, the highest since February 1989.

    Home Sales

    The U.S. dollar may extend this month's slide versus the euro to 2 percent before a National Association of Realtors report tomorrow that may show U.S. existing-home sales dropped last month to the lowest in four years.

    Federal Reserve Chairman Ben S. Bernanke testified before Congress last week that there will be ``significant'' losses on loans to homeowners with poor credit.

    Sales of U.S. existing homes probably slid to 5.87 million in June from 5.99 million the previous month, according to the median forecast of 70 economists surveyed by Bloomberg. The Commerce Department will report on July 26 that new home sales fell last month to 890,000, close to the lowest in almost seven years, according to a separate Bloomberg survey.

    The Fed's benchmark interest rate has been unchanged since policy makers lifted it to 5.25 percent in June 2006, while the Bank of England has raised rates five times since August to 5.75 percent. Federal funds futures showed the likelihood of a decrease in the target rate for overnight lending between banks in December rose to 26 percent from 22 percent a week earlier.

    European Services

    Gains in the euro were limited today after a report showed growth in Europe's manufacturing and service industries slowed more than economists expected in July.

    Royal Bank of Scotland Group Plc's combined index, spanning industries from autos to banking and airlines, fell to 57.3 from 57.8 in June, Reuters Plc reported. Economists expected the composite index to slip to 57.6, according to a Bloomberg News survey. A reading above 50 indicates expansion.

    Any advance in the euro may also stall around $1.3850 because of options that will lose money beyond that level, said Lee Wai Tuck, currency strategist at Forecast Singapore Ltd. Options give holders the right to buy or sell a currency at a set price on a fixed date.

    Japan's key overnight lending rate of 0.50 percent is the lowest among major economies. The benchmark rate is 11.50 percent in Brazil, 8 percent in New Zealand and 6.25 percent in Australia. The yen has weakened the most this year versus Brazil's real. Against the yen, the Brazilian real dropped to 65.5127 from 65.8510.

    To contact the reporters on this story: Aaron Pan in London at apan8@bloomberg.net ; Ron Harui in Singapore at rharui@bloomberg.net
    Last Updated: July 24, 2007 07:27 EDT

     
  2. Its getting closer and closer to a dollar rebound
     
  3. Very, very close Daal. Long the Greenback.
     
  4. I agree. When all are this bearish, have the courage to stand against.

    The subprime crap makes me laugh - not because it's not as bad as people think. It's much worse, actually. What makes me laugh is the thought that the problem only exists in the US. I've got news for folks, it's everywhere. The UK is just starting to see it now, and it'll spread like the virus it is.
     
  5. I personally don't think there will be a rebound any time soon.. It will stay like this for a while-- the country isn't doing enough economically to facillitate a rebound..
     
  6. As if economics had anything to do with this. I'm tempted to look at GDP numbers in the US versus the EZ. Not the last quarter, but the last 5 years.

    Of course, if I were to look at those numbers, I wouldn't base my trades on economic numbers. Or, if I had, I'd be in the red.
     
  7. It's not about economic numbers but at the end of the day that plays a big role in what the currency will be doing. I have been taught to believe that economics is the main governing factor when it comes to currencies- so if the economics isnt showing much promise, how can the currency?
     
  8. So then the Rand and Turkish Lira must be reflecting the excellent economies in South Africa and Turkey - in comparison to the shitty US one, right?
     
  9. varuns, like the others, you've been brainwashed. A sucker of the system.
     
  10. Possibly.. But it is how I was taught and I use the majority of my trading based on that and it hasn't failed me yet.. As far as the Turkish and SAfrican currencies go- they are doing well. Just will take a lot of sustained growth to reach levels.. Look at the Indian rupee.. 3 months ago it was trading $1- Rs.43.05

    Now it's down to 40.3. Simply cause of the sustained growth- hence your Rand and Lira topic doesn't hold..
     
  11. The dollar has done very well in past recessions. look at history
     
  12. Well, I am one of these "idiots" who is going USD long ! Thanx for the contrarian indicator ! :D :D :D
     
  13. It's just a matter of what Ben Bernanke does. If he tigtens up dollar goes up and vice versa.

    What happens is he lets the dollar to break this supposingly unbreakable low level, that should tell you something. Unless he's trying to fake everybody and squeeze some speculators.

    Always remember his "helico drop" of money speech. He already told you what he's going to do. It's called the Bernanke "put" BTW.

    http://www.federalreserve.gov/boardDocs/speeches/2002/20021121/default.htm
     
  14. long dollar and yen against euro looks like a good medium term bet.
     
  15. I'll never forget, I think it was newsweek had a picture of a dollar shrinking. With the headline the incredible shrinking dollar!

    One of the talking heads on CNBC says thats it the dollar has hit bottom.

    It turned, I think it was at 1.365 to the euro and retraced all the way to 1.16?

    It is always darkest before the dawn.

    When it turns it will be vicious and quick, and the carry traders will be left hanging.

    Happy to hold long Yen and long dollars at these levels or better.
     
  16. US GDP - MEW mortgage equity withd. = negative growth

    the numbers are fudged. now it seems ok to take food and energy out of the equation. and buddy bernanke feels that the 'key' to controling inflation is controling expectations? but if it was a conspiracy they would be hiding these lies. they dont seem to be hiding anything. either people are blind or they do not speak english or maybe not paying attention. Maybe busy eating hamburgers and smoking blunts.
     
  17. I think that will be quite long term not medium term..
     
  18. medium term short squeeze, then the course will resume to its value= fiat.
     
  19. I hope you're right because I am not willing to wait that long!! just don't see it happening though..
     
  20. if you only knew what these boys really had up their sleeve. they do not care. wealth concentration is the name of the game. I am almost sure a few of these boys have hundreds of billions in a numbered account somewhere in swiss land. Just have not seen it for myself. You are dealing with proffessional bankrupters targeting america. Just trying to control the current sea or currency. Find out what a berth certiificate is, then find out if you have one. Is the bank along the river where you store money? admiralty maritime law overules the law of the land. who was really at the boston tea party and what was really in those crates? the dutch east india company was involved in what kind of trade? too bad we dont have a narcotics futures exchange. I wonder why they call it controlled substance as opposed to illegal substance. I better stop fore this becomes a mispost. but anyway, dilution is their specialty. go to your local lounge and pay 15 dollar for a drink. how much alcohol do you think you are really getting? the bankers would love for the dollar to pop. they will just make a new currency with a new name. or implant chips into peoples foreheads, saying that a few rogue bankers at the fed have caused all of this, they were fired, and now they have this 'solution'. I can see it now. PRS problem, reaction, solution. I think it was hitler who said 'I will build an entire empire with out one ounce of gold'. Not really my ideas. All of this is documented. I can provide links and citations. The only man fit enough to handle this is Ron Paul, he is very well informed. The children are rising, the adults are in trouble.