Dollar plunges to fresh lows By Stephen Foley Published: 11 July 2007 The dollar has plunged to its lowest level ever against the euro amid evidence that the American housing market slowdown may be leaching into other areas of the economy. And sterling also hit a fresh 26-year high against the US currency, with £1 at one point buying close to $2.03. The dollar's decline came amid warnings of worsening conditions in the housing market. The rating agency Standard & Poor's predicted more defaults among low-income borrowers who have taken out so-called "sub-prime" mortgages, while the biggest home improvement chain, Home Depot, issued its second profit warning in two months. The number of homes being built in the US is at a 10-year low and tumbling prices in many parts of the country have discouraged people from moving. "We look at the overall market and say there's still a correction that lies ahead of us," Home Depot's chief executive Frank Blake said, adding that he expected "continued headwinds through 2007 and probably some into 2008 as well". S&P warned it may downgrade the creditworthiness rating of $12bn (£5.9bn) of bonds backed by sub-prime mortgages, and of other credit investments which are in turn backed by those bonds. Those other investments, known as collateralised debt obligations (CDOs), are widely held by hedge funds and other investors across the US financial system. Also yesterday, Moody's downgraded $1.6bn of sub-prime mortgage-backed securities. US house prices will drop by 8 per cent between 2006 and 2008, S&P predicted, exceeding the record peak-to-trough drop of 6.5 per cent between 1991 and 1992, making investments backed by sub-prime loans issued in 2006 particularly vulnerable. The fallout from rising sub-prime mortgage defaults is therefore widening, and foreign investors continued to withdraw from related financial markets yesterday, adding to the downward pressure on the dollar. David Solin, a partner at Foreign Exchange Analytics Investors, said investors should expect less foreign investment from now on because of a "global rethink of the credit quality of buying highly leveraged, high-yielding debt instruments". By the close in the US, the euro was trading at $1.374, up just over a cent. The pound closed at $2.027, up 1.2 cents. Stocks were also hit, with the Dow Jones shedding just over 1 per cent to 13,501.7. The US economy has decelerated sharply this year, as weak housing markets and high petrol prices have undermined consumer spending power. Meanwhile, growth in the UK and eurozone has shot ahead and interest rate rises have been needed to keep inflation under control. The eurozone economy is expanding at its fastest pace for six years. Gregory Salvaggio, a vice-president for trading at Tempus Consulting in Washington, said there was a stark contrast with the situation in the US, where inflationary pressures are tempered by the weakness of the housing market, so that the Federal Reserve is holding rates steady. "The ECB is going to hike rates at least two times more this year and US bond yields are falling, giving no incentive for large global investors to hold dollars," he said. Traders had been nervous before a lunchtime speech by Ben Bernanke, the chairman of the Federal Reserve, to the National Bureau of Economic Research, in which he was due to talk about inflation. Any suggestion the Fed might view price pressures as rising would have lifted interest rate expectations and given the stock market a jolt, but would have supported the dollar. In the end, a more doveish tone left traders free to keep selling the dollar.
its very hard to tell how many dollars are being printed. A good way to tell is to look at a basket of commodities and see what the dollar is buying now. so if you look at this basket, one can assume the printing presses are working around the clock, and too many dollars are chasing the resources. thats why your seeing oil test 75 or higher. Gold is next. The FED talks tough but behind the scenes, the world is being flooded. Either that or some rogue regimes are using master counterfitting methods. as the printing presses flood the market, time course implications are that the resources are being stolen from producing countries. The rubber band is being pulled to the extreme. And it will be pulled even further if another GOP candidate fills the White House. But debt management, and fiscal prudence will lead to severe pain world wide. Either way inflation is here to stay. Or stagflation.
I like dollars. And I am buying them. That is Canadian Dollar, Australian Dollar, New Zeland Dollar, The eurodollar. ALthough in modertion b/c many of them are over extended.
We owe 9 trillion, trillions more coming due with SS and medicare liabilities and underfunded corporate pensions that will fall to the US goovernment to make up. Subprime bail out coming and the cost of the Iraq and Afghan war at 3/4 of a trillion so far and thats another trillion. We have been spending like money is water for years and it is catching up to us. Is it any wonder people are getting USD shy?
Noticed 400 pips move yesterday in GBP /JPY....=> great vola !=> great opportunities=> who cares about the rest ???