In another capricious day on the currency markets, the U.S dollar has picked up its speed against the Euro since there was a aloft alteration in U.S economic growth. The official data showed that U.S GDP grew more than excepted. And this made the U.S dollar climb up 0.4 per cent to $1.3150 against the euro by mid-afternoon in New York, its first rise since six days. But since the markets are unpredictable, the dollar again tumbled a fresh 20-month low of $1.3218 against the euro in Asian trade market. And this may continue for few more days.
The real issue is the bond market and what amount of losses foreigners are willing to take. The dollar isn't an issue until rates rise.
The American dollar is getting as much respect these days as U.S. war policy. The euro, the currency used by 12 European countries, this week rose to a 20-month high of $1.3218, and it appeared only a matter of a few weeks before the British pound hit $2 for the first time since 1992. But the weak dollar can be explained in simple terms. The European Central Bank and the Bank of England were expected to keep raising their key interest rates while the U.S. Federal Reserve was expected next year to cut its key rate. Lower fixed-income returns in the U.S., coupled with a slower-growing economy, made American investments less appealing than those in Europe. People were turning dollars into euros and pounds to make the switch. That reasoning seemed borne out yesterday when the dollar gained back some ground against both the euro and the pound after a report that the U.S. economy grew at a 2.2% annual rate in the 3rd quarter. Nobody seemed worried about the long-term health of the dollar -- but what happens if the dollar keeps falling?
The U.S. Dollar Index is computed using a trade-weighted geometric average of six currencies. The six currencies and their trade weights are: Euro -- 57.6% Japan/yen -- 13.6% UK/pound -- 11.9% Canada dollar -- 9.1% Sweden/krona -- 4.2% Switzerland/franc -- 3.6% notice what currencies are missing? Chinese yuan and Mexican peso, our 2 largest trading partners..... if included, the index may be at 50 by now...gold at $1200 bottom line...your dollar purchasing power is getting hammered regardless of CPI/PPI numbers......
Thanks for replying. But what do you mean? Is the U.S dollar really in danger and is its purchasing power reallygoing to strike off? Yes, its understood that if Chinese yuan and Mexican peso currencies are added the index will touch above 50. but how in this context , the purchasing power of dollar getting hammered can u explain bit clearly
Tide goes in..tide goes out.. Bought DX calls last year at same level..plan on it again.... $ - commodities - bonds- stocks - $- commodities - bonds - stocks......