The Crashing US Dollar:

Discussion in 'Wall St. News' started by capmac, May 1, 2006.

  1. capmac


    Why I Am Watching The Dollar

    Monday May 1, 9:29 am ET
    By Gary Kaltbaum

    Gary Kaltbaum is an investment advisor with over 18 years experience, and a Fox News Channel Business Contributor. Gary is the author of The Investors Edge.Mr. Kaltbaum is also the host of the nationally syndicated radio show "Investors Edge" on over 50 radio stations. Gary is also editor and publisher of "Gary Kaltbaum's Trendwatch"...a weekly and monthly technical analysis research report for the institutional investor.

    We really needed to start today with a chart of the almighty DOLLAR. We do not know what effect it will eventually have but we have our ideas. Very simply, and as we have expected since its wicked breakdown 10 days ago, the DOLLAR is cratering...not just going lower...but cratering. We try to stay very technical with our words but can't help but wonder what is at hand and what the implications are going to be down the road...but we promise you...they are not good. We have been believers and have told you many times that our good buddy Greenspan sowed the seeds of this by keeping rates ridiculously too low for too long to protect our economy...when he should have just let things be. Because of this, we are now dealing with a housing bubble, soaring commodities, soaring oil and a plunging dollar. Ladies and gentleman, ultimately, this has the potential for a powderkeg. In the past week, the run by Big Ben Bernanke, almost said that the raising of rates on the short end could stall soon. We would hate to see what would happen if Big Ben had to raise rates to defend the dollar.

    Hand in hand with the dollar is the BOND MARKET. The only good news is that for the past couple of weeks, the drop has stalled. But any attempted bounce has been about as anemic as can be. Oversold or not, BONDS are in a bear market...but are due for a bounce...maybe. Any bounce will be sellable at this juncture.
  2. capmac


    The US dollar takes a pounding over deficit

    By Steve Johnson in London and John Authers in New York

    Fri May 12, 7:20 PM ET

    The US dollar suffered a severe sell-off on Friday, taking it to its weakest level against a trade-weighted basket of currencies since October 1997, in a tumble that helped to trigger falls across world equity markets.

    Worries about US inflation, which have intensified since the US Federal Reserve's rate-setting open market committee met on Wednesday, sparked further sharp losses for US stock markets. The Nasdaq Composite fell a further 1.3 per cent after a 2 per cent fall on Thursday, while the Russell 2000 index of smaller companies was down more than 5 per cent for the week.

    US government bonds also suffered, bringing the yield on the benchmark 10-year bond to its highest level in four years.

    The dollar has lost 7 per cent against the euro, yen and sterling since the start of April - a slide that will in turn intensify worries about inflation in the economy. Traders are concerned about the role a weaker dollar will have in correcting the US current account deficit, which is now about 7 per cent of GDP.

    The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

    Marc Chandler, economist at Brown Brothers & Harriman in New York, said: "Precisely what officials feared would happen from the large global imbalances is now taking place in reaction to their clumsy attempt to 'fix the problem'. Volatility in the capital markets is rising. Global equities are tumbling."

    In Japan, the Nikkei 225 stock average fell 1.5 per cent to 16,601.78, its lowest finish in seven weeks, while in London, the benchmark FTSE-100 index suffered its worst one-day fall in two years, closing 129.9 points, or 2.15 per cent, weaker at 5,912.1. This was a two-month low.

    Later the selling also spread to Latin America where the main market indices for Mexico and Brazil fell 1.57 per cent and 1.73 per cent respectively.

    Inflation fears have increased sharply since the Fed's open market committee meeting warned that further interest rate rises may yet be necessary. "It opened some eyes," said Brian Williamson, an equity trader at Boston Company Asset Management.

    In New York, the dollar ended at $1.293 to the euro and at $1.894 against sterling. Against the yen, it stood at Y110.02. Traders thought a correction was likely.
  3. capmac


    Dollar plunges on Paulson appointment

    By Steve Johnson

    Published: May 30 2006 11:46 | Last updated: May 30 2006 19:22

    The US dollar fell sharply on Tuesday as Hank Paulson, Goldman Sachs’ chief executive, was named as the new US Treasury secretary, replacing the increasingly pressurised John Snow.

    Mr Paulson has extensive links with China and some saw him as potentially better equipped than his predecessor to encourage Beijing, and the wider emerging Asian bloc, to allow a faster appreciation of the renminbi in order to help reduce global economic imbalances.

    Beijing has allowed the renminbi to crawl just 1 per cent higher against the dollar since last July’s 2.1 per cent revaluation, with the currency falling to a nine-week low of Rmb8.032 on Tuesday. The importance of this issue was made clear by George W. Bush, US president, who said one of Mr Paulson’s objectives would be to ensure the currency flexibility of the US’s trading partners.

    “China has not taken kindly to pounding the pulpit and speakers who seem to convey an antagonistic approach,” said Michael Woolfolk, senior currency strategist at Bank of New York. “Mr Paulson has considerable experience in China and is well regarded over there. He could reinvigorate the discussions over currency policy.”

    He added: “Paulson represents a window of opportunity to accomplish a soft landing to a rapidly growing global imbalances problem. If anyone is capable of carrying this off, he is one of the best placed. The ‘strong dollar’ policy may quite quickly have an epitaph written for it: ‘rest in peace’.”

    Monica Fan, global head of FX strategy at RBC Capital Markets, also saw Mr Paulson’s Chinese links as crucial. “Paulson’s intimate knowledge of the Chinese administration and pro-environmental stance means he is more popular in China. He may be more effective in persuading China to allow greater currency appreciation,” she said.

    However, Ms Fan argued this could allow the dollar to strengthen against the euro, with European currencies no longer having to bear as much of the burden of dollar adjustment.

    Tony Norfield, global head of FX strategy at ABN Amro, argued that Mr Paulson would not be as bad for the dollar as several other candidates for the Treasury job would have been, notably Don Evans, who was seen as reacting to the concerns of industry, and Martin Feldstein, who had said the dollar needed to fall by 30-40 per cent to help rein in global imbalances.

    Indeed, the dollar had fallen in morning trading on speculation that Mr Evans was to be appointed, before initially firming on the news that Mr Paulson had been named, only to hit new lows later on. By mid-session New York trade, the dollar was down 1 per cent at $1.2866 to the euro, 1.3 per cent to $1.8818 against sterling, 1 per cent to SFr1.2119 against the Swiss franc, 0.2 per cent at Y112.23 against the yen, and 0.6 per cent to C$1.0995 against its Canadian counterpart, brushing 28-year lows.

    Some attributed part of the dollar’s sell-off to a slide in US consumer confidence in May, although the reading still came in ahead of market expectations.

    The dollar did gain 2.3 per cent to R$2.3245 against the Brazilian real and 0.8 per cent to 11.274 pesos against the Mexican peso as a selective withdrawal from emerging markets continued.

    Sterling was strong, rising 0.3 per cent to £0.6835 to the euro, 0.8 per cent to $A2.4704 against the Australian dollar and 1 per cent to Y211.08 against the yen, amid a view that housing data due on Wednesday might prove strong enough to tilt the Bank of England towards a near-term rate rise.

    The yen fell 0.7 per cent to Y144.34 to the euro as Toshihiko Fukui, the governor of the Bank of Japan, reiterated his view that the end of quantitative easing would not automatically spell the end for Tokyo’s zero interest rate policy.
  4. toc


    I did not read the lenghty posts above but have been ranting for last two years that THERE IS NO WAY IN HELL FOR US TO COME OUT OF ITS HUGE DEBT WITHOUT WEAKENING THE DOLLAR.

    The biggest losers will be Japanese, Chinese, British and Dutch.
  5. Cheese


    The Chicken Lickens are uselessly flapping their wings because the dollar has taken a dive.

    It won't change one iota the financial inter-reliance all major nations place on each other and the intent to support each other

    There is not going to be a cataclysmic meltdown.
  6. There is no alternative to owning the dollar.

  7. toc


    'The Chicken Lickens are uselessly flapping their wings because the dollar has taken a dive.'

    OECD forecasts 33-50% correction in USD from here on.

    There is no use arguing.....only time will tell who was right.

  8. Dollar bears have been screaming for a cataclysm for how long now? Remember the calls of 1.50 EUR/USD by mid 2005, simply because the EUR hit 1.36? What happened mid 2005? Those bears vanished into the woodwork, only to be called out again when the dollar took it's latest move.

    Will it be "different this time"? Who knows. People who call for a crash will eventually be right, given enough time. But that amount of time may be far longer than most are willing to wait.
  9. toc


    I had predicted the market crash/correction in September 2005 to one professional guy way back in 2002. Markets did not correct but lost value in terms of dollar slide so indirectly my call did not go totally wrong.

    Now both markets and dollar are correcting, with Japan bent on rising interest rates to fuel their rise from decade long stagnation, dollar can see further slide when the 'carry trade' positions start to liquidate to honor the borrowings in yen.

    There is other logic also which says strong holdings from China and others would not allow dollar to crash or they will end up in a hole.......this infact hold 10 times more weight but seeing from the position of the US...............there is NO FRIGGING WAY OUT OF THE $8T DEBT THAN BY INFLATING AND WEAKENING USD. IF THERE IS ANY PLEASE LET US KNOW AND WE WILL LISTEN WITH DEEP INTEREST AND ATTENTION.
  10. There are currency baskets and commodities. Both are significant opportunities for diversification.

    Remember - if you live, work in the US, you are structurally long the USD.
    #10     May 31, 2006