Why is the dollar getting stronger?

Discussion in 'Forex' started by fatrat, May 1, 2008.

  1. fatrat


    Has something fundamentally changed? Why has the dollar been going up. Are they pricing in the fact that they think interest rates won't go down anymore?
  2. When you get an answer from "them", well, you'll have your answer.
  3. fatrat


    We are not amused. "They" = the market. They are always amused.
  4. correct. they are also pricing in that the euro and pound will weaken due to economic conditions over there.
  5. Dead Cat Bounce in it's purest form occurring in the purest free market.
  6. A 38.2% rally ( of the entire down move started in early February ) in just 7 trading days is anything but a "dead-cat" bounce.
  7. DrEvil


    FED is running out of rate cuts.
  8. European banks and exchanges are closed. There are not enough patriots defending Euro.
  9. :confused:

    This from Reuters:

    FOREX-Dollar rises broadly; data backs view Fed near pause

    NEW YORK, May 1 (Reuters) - The dollar climbed to a five-week peak against the euro and a seven-week high versus a major currency basket on Thursday as data indicated a generally stable economy, suggesting the Federal Reserve's monetary easing could slow.

    Investors focused on the positive aspects of the U.S. spending and core inflation data as well as a key manufacturing survey for April and shrugged off higher-than-expected U.S. initial jobless claims.

    "The ISM data shows manufacturing is not deteriorating further and as long as we keep getting status-quo, non-deteriorating numbers the market will buy the dollar. That's the psychology of the currency market right now," said Joseph Trevisani, chief market analyst, at FX Solutions in Saddle River, New Jersey.

    The Institute for Supply Management said its index of national factory activity was unchanged in April from March at 48.6, indicating that manufacturing contracted for the third straight month but not as much as economists had expected. For story, click on [ID:nN01387325].

    The euro fell to a five-week low against the dollar to $1.5438, according to Reuters data, but traded back up to $1.5457, down 1 percent. Traders said markets earlier ran stop-losses in euro/dollar below $1.5490, accelerating the currency's decline. Most market participants now expect a lower trading range between $1.52-$1.57 after the euro rose to a record peak above $1.60 last week.

    "Nobody can come up with a good reason to buy the euro right now. Euro-zone growth probably won't return to 2.5 percent and the ECB is not likely to raise interest rates," Trevisani said, referring to the European Central Bank. Benchmark euro zone interest rates are currently at 4 percent.

    In contrast, a series of interest rate cuts by the Fed has helped shore up the ailing U.S. economy and it's likely that the central bank will not ease further, he added.

    The Fed cut rates by 25 basis points to 2 percent on Wednesday, as most had expected.

    Against a basket of currencies, the dollar rose nearly 1 percent to 73.305, after earlier hitting a peak of 73.328, the highest level since March 11.

    Earlier in the session, the government released data on the the Fed's preferred gauge of inflation, the core personal consumption expenditures, or PCE, price index, which was higher than market expectations, while U.S. personal spending rose twice as much as forecast despite a cooling economy.

    The data blunted the sting of the U.S. jobless claims number and backed a growing view that the U.S. economy is in far better shape than many people had thought.

    "We had pretty bad numbers out of the U.S., but they were not terrible," said Rafael Martorell, chief FX dealer at BNP Paribas in New York.

    "So that's helping the dollar against the euro. And when the euro is down the G7 is happy because oil comes down and all other commodities, and the bubble we're having in that sector is slowly coming off." he added.

    Markets have shifted their focus from the Fed's failure to signal a definitive end to rate cuts to worries about the health of the euro-zone economy.

    A run of weak sentiment data from the euro zone has stoked expectations that the ECB may soon tone down its hawkish rhetoric and gradually embark on its own monetary easing.

    The Fed statement on Wednesday, meanwhile, signaled that its next move would depend on developments in financial markets and the economy. The statement disappointed some investors who had expected a clear sign that the Fed was done with cutting rates after dishing out 325 basis points of cuts since mid-September.

    Against the yen, the dollar edged up to 104.00 <JPY=>. The dollar rose 1.2 percent against the Swiss franc to 1.0479 <CHF=> after hitting a two-month high at 1.0499, while sterling fell 0.6 percent to $1.9738 <GBP=>. (Additional reporting by Steven C. Johnson; Editing by Leslie Adler)

    © Thomson Reuters
  10. stevenao


    You will see the whole FOREX world move when USD moves. It is going to freak out alot of people.
    #10     May 2, 2008