Wednesday, December 31, 2008

US Dollar Fears Could Drive More Investors to Gold

Concerns about the US economy look set to ensure the dollar remains relatively weak, paving the way for further investment in gold.

In an interview with Bloomberg, Shaun Osborne, chief currency strategist at TD Securities in Toronto, said that the chances of the dollar gaining strength were slim given the current position of the US Federal Reserve.

This could prompt more people to buy gold as a weak dollar increases the appeal of bullion as an alternative investment vehicle.

"With the Fed reverting to non-conventional monetary policy, the whole notion of a strong dollar goes out the window," Mr. Osbourne confirmed to the news provider.

"The risks are skewed to dollar weakness."

Prior to the Fed's latest rate cut, Afshin Nabavi, head of trading for MKS Finance, noted that any fall in the value of the dollar would naturally have a positive impact on the price of gold.

"Everyone is banking on a lower interest rate in the US," he told Reuters.

"If the dollar continues to lose value, of course it will benefit gold."

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Goldbug, 31 Dec '08

Thursday, December 18, 2008

Jim Rogers "America is out of control" demise of the dollar

Jim Rogers: 'Get out of U.S. dollars' (12.15.08)

Wednesday, December 17, 2008

Is the Party Over for U.S. Dollar? Probably!

Earlier this month I asked the question of when the artificial strength of the U.S. dollar was coming to an end. We may be seeing the initial move toward that happening, as it seems deleveraging, which propped the dollar up, may be winding down.

The only question for the dollar, has been how long the deleveraging would take to unwind, as the complexity of the funds involved made it impossible to know. It seems the majority of that has happened now, and the dollar is responding in a predictable manner.

With U.S. obligations now in the trillions of dollars, the absolute necessity of a strong U.S. dollar is crucial to the successful implementation of the misguided bailouts and simulus package, but that isn't going to happen any time soon.

Some were hoping the deleveraging would last longer, giving the dollar a longer period to remain strong, but that isn't going to be the case. Most analysts believe that not only is downward pressure coming short term, but it should last for some time as well.

Today the greenback dropped to a 13-year low against the yen, and fell to its largest one-day loss against the euro, as currencies responded to the slashing of the benchmark interest rates to a range of zero to 0.25 percent, which is the lowest among major economies in the world.

While there are those looking to what Japan did as a blueprint for the U.S., that's a huge mistake for a couple of reasons.

First, the Japanese economy hasn't come near to recovering from its performance when they instituted a similar strategy as set forth by president-elect Obama. He wants to build up the infrastructure of the nation to create jobs.

Just that alone is an unfortunate idea, as it in reality crushed the Japanese economy.

But that's not the only reason it's foolish and misguided. The second reason is the difference between Japanese and American investors.

In Japan, people were willing to invest in the bonds issued by the government because of the huge savings available, as well as the willingness of local investors to fund the debt. Americans can't do that, as they basically have no savings, which makes that a mute point.

So who will fund U.S. debt with the low interest rate and the government talking pursuing quantitative easing (buying Treasuries), that will put more downward pressure on the U.S. dollar.

In the end, the government should have listened to the many voices saying they should let the market sort out the mess, as it's the best mechanism available to do that.

Now that they've decided to enter fully into the fray, they've done far more harm to the U.S. dollar, the economy, as well as the American people.

Essentially everything they've done has backfired and been impotent. It will continue to remain that way no matter how much money they throw at the problem. We're all going to suffer because of their inability to leave things alone and resist intervening.

We're going to be in for a significant bear market concerning the dollar for some time to come. It's only just beginning.

Friday, December 12, 2008

Jim Rogers: Most Large U.S. Banks Totally Bankrupt

Commenting on the health of U.S. banks, billionaire investor Jim Rogers said that most large banks in the U.S. are "totally bankrupt," and the attempt to fix them by the government is completely misguided.

Rogers said that the implementation of the $700 billion bailout does nothing to really fix the problem, it only rewards the poorly managed firms and keeps them in business while they should be allowed to fail.

For example, the bailout doesn't do anything to tackle the problem of how banks take care of their balance sheets; one of the key negative behaviors that poorly run banks practice.

All that the government is doing is rewarding the terrible management of these banks with an extended life, when in reality they need to be left to fail so the banks that are run well can either take them over or win their customers.

"What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," said Rogers. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

With America now taking similar steps that led Japan to years of economic stagnation, Rogers also believes that will probably be the economic fate of America as well.

What happened with Japan is they also wouldn't allow their large financial institutions to fail, and now that President-elect Obama is asserting his economic idea is to focus on building up national infrastructure, it'll probably make it worse, as that's also the strategy Japan used to work itself out of a financial crisis they've never recovered from.

I remember Hillary Clinton mocking John McCain for saying at one time that he would do nothing to fix the economy. That is truly the role the government should play, yet that are in a stage of bailout addiction, and they can't keep away from attempting to gain political favor by passing around the taxpayers money.

As Rogers correctly asserts, the current actions will probably end up with America weakening for a long time into the future. All this because politicians can't admit there is nothing to do but ride this problem out.

History has shown that if what is called the Great Depression in America would have been left to itself, it only would have been a very short, temporary pain that would have been taken care of in a relatively short time, as previous recessions had proven.

That's the kind of courage we need today, to have polticians leave it alone and acknowledge they aren't a factor when it comes to the free market. Very few are willing to walk that wise path. The result will be Americans paying for it for years into the future.

Thursday, December 11, 2008

Ron Paul talks on the Root of the Problem of Financial Bubbles

Ron Paul gives a lesson in the root causes of financial bubbles and what we need to take care of it so we can have a sound U.S. dollar.

Wednesday, December 10, 2008

Increased Investor Risk Appetite Pummels U.S. Dollar

Although the bailout for the auto industry seems to have given some investors an increasing risk appetite, and thus has weakened the U.S. dollar, it is far from a done deal, and Republicans are rightly threatening to vote the corporate welfare bill down.

The fickleness of investors and the market makes this the type of story that can change from day to day, and has.

Both the euro and British pound were up against the U.S. dollar today, with the euro rising 0.7 percent against the dollar to $1.3016, and the pound gaining 0.2 percent to $1.4788.

In the afternoon, the dollar index (DXY) fell by 0.5 percent to 85.48.

With the yen also being considered valuable to wary traders, it also suffered today, even falling against the U.S. dollar to 92.59, a drop of 0.3 percent. The dollar isn't far off a 13-year low against the yen; if it goes below 90.90 yen it'll reach that level.

There is considerable risk the dollar will plunge further if the Federal Reserve cuts its benchmark fed funds rate next week from the current 1 percent. Many think it'll cut the rate to 0.5 percent at that time, putting downward pressure on the greenback.

Friday, December 5, 2008

Is Artificial Strength of U.S. Dollar Coming to an End?

The unusual circumstances surrounding the underpinning of the U.S. dollar has many analysts unsure of how long that shifting foundation can last.

Forced liquidation or deleveraging has been the key reason the dollar has performed so well lately, and it's now questionable how much longer that process will remain a factor.

Once that slows down, the dollar will have tremendous downward pressure on it. Think of how that will sit with American businesses already facing major challenges from China and its currency.

Bob Sinche, head of global FX and rate strategy at The Bank of America in New York said, "Foundations for the dollar's recent rally have not been solid. The result of repatriation, deleveraging, quantitative easing and a major scarcity of dollars. But now we are bound for a correction."

It's not a matter of if, it's only a matter of when. And that seems to be coming on us pretty fast.

Another factor recently introduced is the steep and fast cuts coming from across the ocean in interest rates. That should also have some impact on weakening the dollar.

Most arguments aren't for some type of long-term wait for the downturn in the dollar. It could start any time, and could be at most, several months out. I haven't heard much about anything longer than that.

Some do think if it takes several months to happen, investors will be willing to take on more risk as economic conditions settle down - assuming they do - and other currencies may not be as attractive at that time.

One thing is for sure, the forced liquidation can't go on forever, and that will definitely undercut the strength of the dollar and put downward pressure on it.

Wednesday, November 26, 2008

German Chancellor Angela Merkel Blasts Use of "Cheap Money" for Economic Management

Although German chancellor Angela Merkel and the German government has implemented a fiscal stimulus plan, it was an extremely modest €12bn over the next two years. While that was probably a mistake, at least Merkel understands that creating money from thin air won't do a thing to take care of the problem they're in.

Merkel and the German government have been coming under increased pressure to contribute to a huge stimulus in relationship to the European Union; now standing at €200 billion. That would be about 1.2 percent of GDP of the 27 member states.

Talking about the contribution of the drop in value of the U.S. dollar to the current global economic crisis, Merkel stated to the German parliament:

“Excessively cheap money in the US was a driver of today’s crisis. I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the US and elsewhere and whether we could find ourselves in five years facing the exact same crisis.”

Some analysts assert the action wouldn't do much to change the economic crisis anytime soon. They're of course right, as is Merkel.

History has proven that the utter stupidity of the New Deal did more to create the Great Depression in the U.S. than anything else. Printing money, devaluing currency, and generating inflation is never an answer to an economic crisis.

The best thing to do is let it play out and allow the market correct itself. That cleans out the bad businesses and leadership, and makes the free market much stronger.

Throwing money at poorly run companies does nothing but reinforce poor management and keeps the real problems from being solved. Government interference in what would have been a short period of economic struggle created the infamous Great Depression in the U.S. We don't need to do the same and create a worldwide one.

Ron Paul in Houston Calling to "End The Fed" - Part Four

Ron Paul in Houston Calling to "End The Fed" - Part Three

Ron Paul in Houston Calling to "End The Fed" - Part Two

Ron Paul in Houston Calling to "End The Fed" - Part One

Wednesday, November 19, 2008

Ron Paul on How to Solve Monetary Problem

Says fiat-dollar system is over: it has failed

Some of the issues talked about:

Need to get to bottom of problem, not offer bandaids

Central bankers can do what they want - no checks-and-balances since 1971

New international reserve currency being discussed

Central bankers selling gold to make it look like U.S. dollar is stronger than it really is.

Yearly deficit should be a major concern

Commodity standard would balance system - restrain problem

Central banking is problem

Need new monetary system

Sound Money is the Answer

Jim Rogers TV: Talks Future of U.S. Dollar

Tuesday, November 18, 2008

The U.S. Dollar is Dying Says Ron Paul

Ron Paul on the failure of policies that are contributing to the death of the U.S. dollar

Saturday, November 15, 2008

U.S. Dollar Reserve Standard about to Collapse Says Ron Paul

Ron Paul: Governments need to stay out of the way and let the markets correct themselves.

Friday, November 14, 2008

Dollar Should be in for a Rough Ride Going Forward

Now the the Chinese have decided to focus on their own infrastructure with the approximate $585 billion stimulus plan, they'll start cutting back on buying U.S. treasuries.

Acquisition of U.S. treasuries worked in China's favor, as it provided money to U.S. consumers who would then buy Chinese products manufactured in the country.

This has worked as the Federal Reserve has been able to keep interest rates low because of the over $1 trillion China has invested in U.S. government securities, which helped prop up the dollar; even though it has struggled until recently.

Consumers were then able to use cheap money to acquire a huge amount of consumer goods; at least until the mortgage bubble broke, and the weakness of those buying habits exposed themselves.

So we're going to see much less Chinese money going to U.S. securities; continued forced liquidation of funds to get access to more cash; printing more money to pay off misguided stimulus plan; and credit continue to be hard to get.

This will end up being "perfect storm" against the greenback, and will eventually put enormous downward pressure on it.

Wednesday, November 12, 2008

U.S. Dollar and Yen Remain Strong ... Investments of Choice for Those Seeking Safety

Safety was the driving force for investors today, as the announcement by U.S. Treasurey Secretary Henry Paulson that the Troubled Asset Relief Program (TARP) would add to its focus of infusing capital into banks, to also helping nonbank financial sector.

Jittery investors interpreted that as problems are emerging in the attempt to fix the financial crisis.

Immediately after Paulson's comments migrated across the news wires, traders ran to safety in the U.S. dollar and yen.

Even so, the dollar fell significantly against the yen, dropping to 94.61 yen from 97.60.

The British pound took a beating today, falling to its lowest levels since June 2002, dropping below $1.50. Against the euro it suffered its worst performance ever.

Much of that was generated from the comment by the Bank of England that the British economy was for all practicle purposes, probably already in a recession. British economists say there's no doubt there will be more substantial cuts in interest rates in the near future; most likely beginning in December.

The Bank of England confirmed this saying if interest rates stay at the current level of 3.0 percent, there's risk the country could enter into a deflationary period of time beginning in the latter part of 2009.

The European Central Bank has been pouring tons of dollars, Swiss francs and euros into banks in the eurozone in hopes it'll encourage them to lend to one another again. The ECB announced Wednesday it would offer $60.574 billion for a week at a fixed rate of 1.43 percent.

Friday, November 7, 2008

Jobs Lost More than Expected, U.S. Dollar Falls

After the announcement the number of jobs lost in the U.S. economy for October were more than forecast, the U.S. dollar gave up much of its Thursday gains on Friday.

Jobs lost in October were about 240,000, a 30,000 increase from the projected 210,000by economists, according to the Labor Department.

Unemployment rates now stand at 6.5 percent, the highest in 14 years.

The euro ended the session at $1.2747, up from $1.2677, while the British pound gained from $1.5530 to $1.5666 against the dollar.

Speculation is if things continue downhill in the economy, it will end up with the Federal Reserve dropping rates to record levels below 1 percent, which could make investment in low-yielding dollar-based assets les desirable.

Thursday, November 6, 2008

US Dollar Gains against Euro and Pound after Rate Cuts

In response to the weakening European economy, central banks started slashing benchmark lending rates in attempts to jumpstart credit markets again.

While the move of cutting rates by the European Central Bank was in line with expectations of 50 basis points, bringing it to 3.25 percent, the cuts by the Bank of England shocked a lot of investors and analysts, as they cut rates by 150 basis points to 3 percent.

[Most Recent Exchange Rate from]

The U.S. dollar responded by strengthening against the two currencies, as at close to 5:00 EST it had gained by .0147 against the euro, and .0126 against the pound.

[Most Recent Exchange Rate from]

Monday, November 3, 2008

Deleveraging Continues to Push U.S. Dollar Upward

As major funds continue to deleverage in order to access cash, the U.S. dollar continues to be a major beneficiary, as the greenback continues to strengthen against major currencies.

Deleveraging means when funds and investors have to sell, they are buying back the U.S. dollar the had previously sold. That drives up the value of the dollar.

With no way of knowing how long companies, investors and funds will have to do this, the length of the time the U.S. dollar will remain strong will also remain unknown.

The U.S. dollar rose against the euro, British pound and yen during the trading session.

Within the dollar index (DXY), it increased to 86.35, a gain of 1.3 percent from the 85.834 close on Friday. The dollar index measures the U.S. dollar against six currencies.

Friday, October 24, 2008

US Dollar Lowest Against Yen in 13 years

Although the U.S. dollar has been the beneficiary of the forced liquidation of commodity positions which are for the most part denominated in U.S. dollars, it hasn't been because underlying fundamentals have changed, as its drop against the yen has proven. Today the dollar fell to a 13-year low against the yen, dropping to 90.89.

It has rebounded some since then, but it does show that the yen is behaving like the fundamentals connected to it, while the dollar isn't because of the forced liquidation mentioned above.

Still, the remarkable factors in the market keep the dollar high against other nations' currencies, as it was up to two-year highs against the euro, while it enjoyed a six-year high against sterling.

Sterling fell to as low as $1.5270 against the U.S. dollar, while the euro was as low as $1.2498. The Australian and New Zealand dollars also plunged against the greenback, with the Australian dollar taking the biggest hit, falling by 7.6 percent to $0.6213, while the New Zealand dollar was right behind it, decreasing by 6.5 percent to $0.5576.

Thursday, October 23, 2008

How Long Will the U.S. Dollar Continue to Rise?

... At least as long as it takes for investors to unwind their positions.

The major reason behind the strengthening of the U.S. dollar is the money investors borrowed over the last several years that is now being called in by lenders.

With the vast majority of that debt being dollar-denominated, it has forced investors to do whatever they can to find greenbacks to pay off those loans. That, of course, has pushed up the value of the dollar.

The majority of this is happening because of the positions held by institutional investors.

Even though this is all true, the tremendous upward movement of the dollar is due for a correction, and I would think it will have to happen sometime soon.

In reality, the dollar really isn't stronger than other currencies, as explained, but it is the currency used in most transactions that have to be unwound. Once that period of time is over, we'll see tremendous downward pressure on the dollar as inflationary pressures once again dominate the currency.

Still, the dollar is expected to continue rising, even though it will experience temporary breathers and drop over a few sessions during this time of unwinding.

Wednesday, October 22, 2008

What is "Forced Liquidation" or Deleveraging?

We're hearing a lot about forced liquidations and deleveraging lately, and their effect upon the U.S. dollar and gold, among most commodities.

What it basically means is someone borrowed money to make a trade. When the money is no longer available to borrow to keep the trades going, investors are forced to sell their investments in order to pay back those loans.

This is why even though the underlying fundamentals that would normally result in a weaker U.S. dollar and surging gold price are still there, they haven't performed in their normal manner.

A number of commodities are being hammered for this very reason; especially gold.

The reason this happens is institutional investors that need cash are "forced" to sell positions in commodities they would rather keep, driving the price down. That's the reason it's called forced liquidation or deleveraging.

Because we are in an unusual situation, it's difficult to know or project the timing of when this will all revert back to normal.

We can be sure of one thing: it will eventually even out and the U.S. dollar will fall, while the price of gold will surge. It's a matter of when, not if.

Tuesday, October 21, 2008

U.S. Dollar in Strongest Showing Against Euro in 20 Months

The U.S. dollar continues to strengthen, as it had its best showing against the euro in 20 months. Much of this is generated from the possibility of a second financial rescue package by the U.S. government, along with talk of a second stimulus package as well.

Commodity prices of responded by continuing to plunge in the short term as the dollar-denominated raw materials continue to struggle, even though underlying fundamentals haven't changed.

Fear will keep this trend going for a time, but as Jim Rogers says, we're now in a "forced liquidation" stage for commodities, but once liquidity comes back to the market, we'll see commodity prices go up again, as demand has only slowed down, but the commodity bull market will now be longer than originally expected because of the financial crisis.

In the short run we'll see the commodity market slow in growth as countries cut back on or put off projects. In the long term we'll see things return to where they've been concerning commodities. We will also see the dollar weaken significantly again in response to the ill-advised bailout that will eventually pummel the dollar and increase inflation from pouring more greenbacks into the economy.

Friday, October 17, 2008

U.S. Dollar Continues as Safe-Haven Choice

With many gold funds needing cash, along with ongoing deleveraging, the U.S. dollar continues to be the refuge of choice for many jittery investors.

With the dollar and the yen basically mirroring the movement of the equities market, they have been the cheif beneficiaries of current market conditions.

The yen is still playing its customary role of measuring risk, and the dollar is moving pretty closely in step, playing a similar role as well.

For the yen, when stocks strengthen - investors sell, when stocks plummet, they're quickly buying the Japanese currency.

The yen continues to be pressured because risk-adverse investors are abandoning carry trades at this time; that has helped the U.S. dollar hold its strength. It'll continue to be difficult to guage risk while the market seesaws back and forth.

Those currencies which will be most negatively impacted by the continuing strength of the dollar will be the British pound and euro.

Thursday, October 16, 2008

U.S. Stock Surge Strengthens Dollar

Currency investors have temporarily taken their eyes off the fundamentals and are helping strengthen the U.S. dollar in response to government response to the credit crisis, as well as the upward moves of the stock market.

While it made no logical sense for the stock market to surge after the troubling news Thursday that mid-Atlantic factory output dropped to its lowest level in 18 years, still it did, and not only that, but the production in the industrial sector in the U.S. also fell to its lowest monthly drop since 1974.

For the most part the reason this is happening is the focus on governments around the world pouring capital into shoring up the credit crisis. This gives the illusion of safety, and for now people are buying into that illusion.

Once the focus comes back to fundamentals, we'll see the dollar soften again, as most of the banks see in the near term.

People have forgotten the real risks involved with the U.S. dollar, and are seeing it as a safe haven. That shouldn't last too long as reality sets back in. Another factor is they still assume the U.S. is the safest bet in times like these.

U.S. Treasuries and other liguid dollar instruments have been the main benefactors over the last few months.

Even the yen has fallen against the dollar in these times, dropping to its lowest level in 7 months.

[Most Recent Exchange Rate from]

Still, confidence in general is still low, and regardless of the government bailouts, credit is still hard to come by.

Monday, October 13, 2008

World Bankers Aiding in Flooding Markets with U.S. Dollars

In a big attempt to release liquidity into the market, the Federal Reserve is getting the help of the Swiss central bank, Bank of England and the ECB, as they are getting together to auction off unlimited dollar funds.

This is unique in history as past dollar swaps were always capped at a certain level. In this case funds auctioned will be unlimited.

Maturity dates for the funds will be offered for 7 days, 28 days, and 84 days for a fixed rate respectively.

These swaps have been one of the reasons the U.S. dollar has continued to strengthen in the last months.

The greenback fell today against the euro and pound, as well as a number of major Latin American currencies.

Today the Dow Jones Industrial Average rose by its highest one-day point total in history, gaining 936 points, to finish the session at 9387.61

Friday, October 10, 2008

How Long Can U.S. Dollar Resurgence Last?

Some people have been caught off guard by the continuing strength of the U.S. dollar, as most that understand the source of its weakness have predicted its continual plunge, especially after the trillions in obligations the U.S. government has committed itself to recently.

A couple of major factors have been responsible for its current strength, although it's only a matter of time before the piper will have to be paid.

One major reason for retaining its strength has been the countries that had lagged behind the U.S. in economic disaster have now come around full circle and are beginning to participate in the global economic tsunami. That has made some other currencies struggle as well.

This week the International Monetary Fund (IMF) said the economies of the UK and Europe will sputter during 2009, along with the U.S.

The other key to a stronger dollar has been investors deleveraging the investments in dollar-denominated commodities, as well as dollars being sold to acquire stocks. Related to this is institutional investors ridding their funds of positions in emerging markets. This has been going on since about the middle of September.

Investors are now in the position of having to buy U.S. dollars so they can unwind those trades.

All of this is simply suspending the day of reckoning for the dollar. The question isn't whether it will happen, the question is when and how deep the shattering of the greenback will go.

Nothing has really changed in the positive for the dollar since its 6-year decline began against its major trading partners. Only lagging behind the economic disaster in America, and now fully partaking in it, has saved the dollar as its trading partners struggle.

Once this changes and demand for goods and services begin to rise again, all bets are off as to how the dollar will respond. The bursting of the commodities bubble is only temporary, as nations will once again start building and need a variety of goods to grow their economies. At that time we'll begin to learn how deep the disease of the troubled U.S. dollar will really be.

Wednesday, October 8, 2008

U.S. Federal Reserve Cuts Prime Rate by Half a Point

The U.S. Federal Reserve cut its lending rates by half a point today, joining other central banks around the world in an effort to boost failing markets.

Lending rates now stand at 1.5 percent from the Fed, with the discount rate also being trimmed by half a point to 1.75 percent.

Other banks cutting rates were the European Central Bank, which dropped it rates from 3.75 percent from 4.25 percent. The Bank of England trimmed their rates from 5 percent to 4.5 percent. Other central banks cutting rates were the Swiss National Bank, The Bank of Canada and the Swedish Riksbank.

This is more symbolic and psychological than really doing anything that will make a practical difference at this time.

U.S. Federal Reserve Cuts Prime Rate by Half a Point

The U.S. Federal Reserve cut its lending rates by half a point today, joining other central banks around the world in an effort to boost failing markets.

Lending rates now stand at 1.5 percent from the Fed, with the discount rate also being trimmed by half a point to 1.75 percent.

Other banks cutting rates were the European Central Bank, which dropped it rates from 3.75 percent from 4.25 percent. The Bank of England trimmed their rates from 5 percent to 4.5 percent. Other central banks cutting rates were the Swiss National Bank, The Bank of Canada and the Swedish Riksbank.

This is more symbolic and psychological than really doing anything that will make a practical difference at this time.

Monday, October 6, 2008

Dollar Strengthens Against Euro as European Economic Fears Mount

Mounting fear that the European market is about to partake in similar results as the U.S. market, has the euro continuing to fall against the U.S. dollar. Today it dropped to a 13-month low of $1.35 against the greenback.

The problems in the European market have been slower to emerge than in the U.S., and now it seems it's about to participate in the same problems.

This has continued to pummel commodities as investors are now eyeing dollar-denominated short-term paper like U.S. Treasury bills.

With the dollar continuing to strengthen, it has left gold in a much less important position than it would usually hold when people are looking for a safe haven for their capital.

Until the U.S. dollar drops again, this will continue to be the way the market moves overall.

While it's difficult to ascertain, it looks like a significant number of overseas U.S. dollars are being brought back into the U.S. at this time.

Tuesday, September 30, 2008

U.S. Dollar in Strongest Performance against Euro since Introduction of Shared Currency

The U.S. dollar made the strongest gains against the euro since the shared currency was introduced in 1999. It performed strongly against other major currencies as well, as the dollar index was at 77.450 later on Monday. It went as high as 79.694 before settling down.

Much of the strength against the euro was based on the thought that the banking system in the U.S. is further along in its exposure than its European counterpart. That will cause the dollar to strengthen until Europe moves further along in its exposure.

For the month of September it has surged by 3.1 percent, while in less than two months it has regained losses spread over the last seven months.

Lending rates for the dollar and euro also reached record highs today as banks continue their tight lending practices in light of economic conditions.

Sometimes at the end of a quarter things can get more volatile, and so it's suggested that we take a breather and wait till later in the week, like other commodities, to reassess what to do at that time.

Friday, September 26, 2008

Commodities will Remain U.S. Dollar Denominated - for now!

The fall of the U.S. dollar has generated the question of whether or not it will remain the currency used to price commodities. While that may happen someday, it's probably not going to be something that happens in the near future.

Assuming there'll be a huge $700 billion bailout package passed in the U.S., that could put huge pressure on the U.S. dollar, and who knows if it will hasten the process.

"At some point in history, all empires decline and at some point in history, the U.S. empire will decline," said Ian Morley, director at British-based fund manager Quantum.

"Until that happens, the world reserve currency, the world trading currency and the currency that all commodities are ultimately denominated in, is dollars."

The other obvious problem is what currency would replace it at this time and history, and there's no obvious answer.

Currencies like the yuan, British sterling or the rupee, aren't going to replace the dollar to price commodities, and neither will the euro, which is far too rigid to work.

One possibility would be the yen, which is already being used by some. Iran is using the yen as well as the euro for its oil trading. Some oil companies have been calling to do business with the euro also. But again, its rigidity leaves a lot to be desired and I don't see that being an overall answer.

The other problem for the euro is China would have to completely revamp its export policy toward Europe, something that won't be desirable for them at all.

So while there is definitely the beginning of rumblings to change from dollar-denominated commodities, until a viable alternative is offered we'll see business as usual in that regard.

Again, the process may be speeded up if the bailout package is passed and the dollar continues to take a beating from more fiat money being pumped into the economy.

This will pressure revenue and profit margins for commodity companies and countries, and could bring about the inevitable change quicker.

Thursday, September 25, 2008

Is the U.S. Dollar on the Verge of Collapse?

The government bailout could have a significant impact on the value of the U.S. dollar going ahead.

Politicians continue to be clueless as to why this is happening and what to do about it.

Wednesday, September 17, 2008

U.S. Dollar Slides as Investors Run to Safety

Against six major currencies measured by the dollar index, the U.S. dollar fell to 78.159, dropping from the 79.149 it stood on late Tuesday.

The British pound, as well as Swiss franc increased by 2 percent against the greenback, with sterling buying $1.8218, a significant increase over the late Tuesday price of $1.7800, while the dollar traded against the Swiss franc at 1.0993, down from 1.1035.

The euro was also up strongly, as it came in at $1.4325, in contrast to Tuesday's $1.4091.

Against the yen the dollar also fell, last standing at 104.55 yen, down from 105.33 later on Tuesday.

Besides the obvious flight from equities, gold futures also put the pressure on because they are denominated in U.S. dollars.

Friday, September 12, 2008

Is U.S. Dollar about to Experience Correction?

After about six years of faltering, the U.S. dollar has enjoyed a resurgence lately, as it's been on a significant upward run.

According to the New York dollar index, against the currencies of major trading partners the greenback has risen by 14 percent since the Bear Stearns fiasco.

More significant is the strength it has experienced against the euro, where it has climbed by 13 percent since hitting a $1.60 bottom a couple months ago.

Much of the upswing has come from investors moving their money to safer U.S. Treasury's, from stocks, bonds and real estate.

Some think there will be inevitable correction for the U.S. dollar soon, which could be precipitated by a jump in the price of oil or better news from emerging markets.

Even so, expectations are that Europe will probably cut rates some time in the next several months, and that should keep the U.S. dollar in a strong position in the near term.

Thursday, September 4, 2008

Today U.S. Dollar Strongest against the Euro in 2008

With the European Central Bank cutting its outlook for growth for the European Union, it suggests there will probably be interest rate cuts soon, which rallied the U.S. dollar to its highest level against the euro this year.

According to the a statement by the chairman of euro zone finance ministers, Jean-Claude Juncker, the euro is still overvalued even though it has fallen recently. That also contributed to the weakening against the dollar.

ECB president Jean-Claude Trichet added that while the lending remains at 4.25 percent, inflation is still high and he views risk to the upside.

Growth for the 15-nation region is projected to grow at about a 1.1 to 1.7 percent rate, says the ECB. For 2009 growth is expected to be between 0.6 percent and 1.8 percent.

The euro fell as low as $1.4321 agaisnt the U.S. dollar, and was at $1.4332 late in the trading day. That's the lowest since December 2007.

Against the yen the dollar fell 1.1 pecent to 107.12.

Thursday, August 21, 2008

U.S. Dollar Falls Against Most Major Currencies on Geo-political Concerns and Rising Oil Prices

Ongoing bad economic data as well as rising oil prices related to geo-political tensions are driving the U.S. dollar down, as it fell against most major currencies on Thursday.

Oil prices have had a direct impact on the strength or weakness of the dollar, as its recent strength correlated with dropping oil prices, and the increase in oil prices is now again putting downward pressure on the greenback.

"The sharp drop in crude prices single-handedly triggered the sharp dollar rally between July and mid August. Now that oil prices are creeping higher once again, it would only make sense to see the U.S. dollar slip as well," wrote Kathy Lien, director of currency research at GFT, in a note to clients.

A report from the Conference Board added pressure to the dollar, as leading economic indicators dropped by 0.7 percent in July, raising the possibility that the economy could flatten out for the rest of 2008.

Manufacturing in the northeast U.S. also continues to drop for the ninth month in a row, although it did slow down in its contraction so far in August, according to the Federal Reserve Bank of Philadelphia.

Continuing problems in the finance and mortgage industry are also keeping pressure on the dollar, as concerns over Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE), and other financial institutions aren't letting up.

Reports that Lehman Brothers (NYSE:LEH) held secret negotiations to sell up to have the shares in the company to Asian concerns didn't help spark confidence in the sector.

Monday, August 11, 2008

ECB Launching U.S. dollar Liquidity-providing Operation

Under the auspices of the U.S. dollar term auction facility, the European Central Bank is starting a 28-day U.S. dollar liquidity-providing operation with a goal of reaching a volume of $20 billion.

Fixed rates will be the same as the marginal rate offered contemporaneously by the U.S. Federal Reserve System.

August 12 at 9:30 a.m. will be the final time bids will be accepted.

Tuesday, August 5, 2008

Dollar Gains Against Major Latin Currencies

The U.S. dollar enjoyed gains against major Latin American currencies today, against the backdrop the Federal Reserve was going to keep interest rates where they're at, with no plan on raising them any time soon.

Today's gains were against the Chilean peso, Peruvian Sol, Brazilian real, Mexican Peso and Colombian peso.

With the Chilean peso, the dollar increased as high as a two-month high of 515.13, although falling back close to the end of the session.

Against the Peruvian sol, the greenback rose to a two-week high of 2.8350, in contrast to the 2.7725 close on Monday.

The dollar advanced for an 8-day high against the Brazilian real, quickly jumping to 1.5775 at about 9:00 am EST.

With the Mexican peso it also got off to a quick start in the morning, as it grew from its poor performance yesterday of 8.8568; a multi-year low. It increased to 9.9377 early in the morning, and held fairly strongly at the end of the session.

Saturday, August 2, 2008

Great Advice For New Forex Traders

I wanted to take the time to share some great advice for new forex traders. This can be quite an intimidating market to get into. I know when I first heard there was three trillion dollars moving around each day, and huge banks were going to compete along side me, I was very intimidated. Don't be. You're really not competing against anyone. Most traders are willing to share with each other because we are all looking to ride the waves of the market and profit. I'm going to share a little with you that should help you out.

News is a pivotal source of forex information, it just isn't directed to forex traders. You'll never hear something directly informative to a trader, but you will hear the information that inevitably gets the market moving in new directions; the economy. Economic news is the stuff that causes currencies to rise and fall, so it is important to make sure you're on top of that. Good news, is good for currency and bad news is bad for currency.

You need to keep your trading strategy very simple. The people that end up losing in this game are the ones that have these very long strung out strategies that are very conflicting and hard to understand. There is no need to reinvent the wheel here. There are a very simple strategies you can follow everyday and make a profit.

You also need to learn to be a logical creature. Emotion in this business can be deadly because it makes you make bad trades, it makes you hold onto unprofitable currency and in the long run leads you into the red. Being logical makes you a cold calculated machine that makes trades on one characteristic, profit.

Lastly, get yourself automated software like Forex Killer. It saves you a lot of time and headaches since it will go through the avalanche of currency data and search for profitable trends that you can use to your advantage.

By: Charley Nash

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Learn how to properly trade with my Free Forex Course.

Monday, July 14, 2008

Uncertainty over U.S. Dollar Continues

The U.S. dollar hovered near a record low against the euro on Tuesday, not long after rising after the U.S. Treasury and Federal Reserve announced emergency plans to help shore up investor confidence in Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE).

Some investors weren't convinced though, as Hiroshi Yoshida, a trader at Shinkin Central Bank said, "It's difficult to actively buy the dollar just because of government support measures, because there are other factors weighing on the dollar, such as worries over the health of financial institutions and rising oil prices.

"The key is his view on inflation. If the market perceives Bernanke to be cautious about raising interest rates, it may add more momentum to dollar selling against the euro."

After the FDIC seized IndyMac Bancorp - as investors swarmed the bank in a panic withdrawing funds on the bank run - stocks in the sector plunged, causing even more instability in relationship to confidence in the U.S. dollar.

As a result, the U.S. Treasury increased its direct credit lines to Fannie Mae and Freddie Mac, adding that they'll buy up shares in the companies if they need to.

Concerning the euro, traders think the euro could rise even higher against the U.S. dollar if the European Central Bank raises interest rates later in 2008.

Friday, May 2, 2008

U.S. Dollar Makes Solid Gains against Major Currencies This Week

The U.S. dollar continued to strengthen, as it gained again against the euro, yen, Swiss franc and Australian dollar over the week.

With the problems in the credit market looking like the worst may have passed, and the job data from the US Labor Department far better than expected, with a loss of 20,000 jobs versus the expected 80,000, investors are gaining optimism about where things are heading.

Unemployment for March also fell, dropping from 5.1 percent to 5.0.

All of this may indicate that while the slowdown will continue, it's dropping in speed, and may be close to plateauing.

Another factor was the expected quarter-point rate cut by the Federal Reserve, which seems to confirm things are getting better, which will help the dollar strengthen.

One concern is whether this will have a negative impact on manufacturing jobs in the U.S, which while declining some, it's nowhere near what it would be if the dollar starts to significantly strengthen. The weaker dollar has kept exports high, and helped keep the industry from losing too many jobs.

Monday, April 28, 2008

US dollar Drops Again, Federal Reserve Decision Looming

The US dollar declined again against several major currencies, as most markets look toward the decision of the Federal Reserve later in the week, which most expect will cut the rate by a quarter point. Even so, the unsurety of what the Fed will do has investors holding back on the greenback until the decision is revealed.

Performing strongly against the dollar was the euro again, which climbed to $1.5645, an increase over the $1.5593 in New York on Friday. The British pound also did well, rising to $1.9900, up from $1.9818.

Also gaining was the Swiss franc, with the dollar buying 1.0353. That was down from what the dollar bought on Friday: 1.0367. The Candian looney also strengthened, ending at 1.0119, in contrast to 1.0164 the U.S. dollar bought on Friday as well.

Another factor in the ongoing weakening of the dollar is the high inflation in Europe, which pretty much guarantees rates won't be cut over there.

Most think there will be a cut on Wednesday by the Fed, and that they'll probably hold cuts for some time.

Thursday, April 24, 2008

US dollar Strengthens Against Most Major Currencies

With the exception of the Canadian dollar, the U.S. dollar gained against the major currencies today, including its best performance against the euro since December 2007. The euro finished down 0.0209 to end at 1.5679 against the U.S. dollar.

The U.S. Dollar Index ended up by 0.757 points to finish at 72.575. The Index measures the US dollar against the Canadian dollar, pound sterling, Swedish krona, Japanese yen, and euro.

"Now that we tried and failed to stay above $1.60 in euro/dollar, it looks like we're coming back to the bottom," said Brian Dolan, head of research at consultancy, in Bedminster, New Jersey. "The U.S. data today is pretty clearly dollar positive and we're coming off some weaker European data."

The Zurich-based UBS AG looks at the euro's performance against the dollar to fall in the range of $1.47 in three months, while within a month it projects it to be at about $1.55.

Better-than-expected employment news and strengthening of the dollar has investors and analysts wondering which way the Fed will go at their meeting next week as far as rate cuts go. It looks like it could be a toss up whether the expected quarter-percentage-point cut will come.

Saturday, April 19, 2008

U.S. Dollar Mixed Against Latin American Currencies

The U.S. dollar was mixed against its Latin American counterparts, as it fell to a multi-year low against the Mexican peso, while also falling against the Colombian and Chilean pesos on Friday.

Against the Brazilian real the U.S. dollar increased from multi-year lows, while it also gained against the Peruvian Sol.

Citing inflation concerns over food and commodity prices, the Mexican central bank held interest rates where they were, as inflation was higher than expected in the early months of 2008. The dollar ended the session at 10.4706, after falling to a low of 10.4348.

After falling to muli-year lows earlier in the session, the dollar gained some back against the Brazilian real, reaching a high of 1.6730.

At about mid day, the dollar fell to a low of 454.75 against the Chilean peso, in contrast to the high of 459.65 it reached on Thursday.

Against the Peruvian Sol the dollar went as high as 2.7235, after reaching 2.7175 the day before.

The Columbian peso gained against the U.S. dollar, as it went to 1786.00 on Friday, after weakening at 1794.50 earlier in the day.

Monday, April 14, 2008

Investors Ignore G-7 Currency Shift

Seeming to think the the warning by the G-7 about steep fluctuations in the exchange rates could cause harm to the global economy, French Finance Minister Christine Lagarde talked down to investors saying they don't understand the significance of the G-7's shift in its outlook on exchange rates.

That was in response to the ongoing decline of the dollar which is starting to impact exports from the strengthening currencies of other countries.

Legard said in an interview: "It's a strong statement which I am not sure the markets have yet fully understood and appreciated."

My thought is: Who cares? That's why it's called a market, and market forces are impacting the currency rates; that's how it should be. To attempt to strenghthen the U.S. dollar so European companies can benefit doesn't do anything for Americans.

Until there are real actions taken, rather than just talking the talk, most investors aren't going to sell their euros or other strong currencies in order to listen to some bureaucrats who want their interests to be put ahead of others.

Friday, April 11, 2008

U.S. Dollar Weekly News Roundup


US dollar rises against Chilean peso on news of Central Bank intervention

The U.S. dollar closed 2.85 percent higher against the Chilean peso Friday after the Central Bank announced it will buy up to US$8 billion (euro5 billion) of the currency this year, a move expected to halt the dollar's recent slide here.


Yuan up 4.3% against US dollar in 2008; 18.3% since Jul 05

The Chinese currency broke this week the psychological benchmark of seven Yuan to the US dollar which could signal a change of policy in Beijing since a stronger currency should help fight inflation and makes food and energy prices cheaper.


Canadian dollar closed 0.44 of a cent lower to 97.71 cents US

The Canadian dollar closed at 97.71 US, losing 0.44 of a cent on Friday. The U.S. dollar stood at 102.34 cents Cdn, up 0.46 of a cent.


The Gulf Common Currency: Implications for the U.S. Dollar

Amidst the US Dollar’s recent depreciation in the global marketplace the looming adoption of a common currency by the Gulf Cooperation Council has weighed down on the minds of many economists and market participants alike. With the adoption of the common currency tentatively scheduled for 2010 it is worth examining both the motivations for a common currency, and its implications in the global marketplace.


Falling US Dollar and Trouble with the Trade Deficit

Ever since the falling dollar really hit the radar screen of the mainstream media, one predictable, knee-jerk response was that this would be a miracle elixir for our ailing export economy. Further, they asserted, the weak dollar would cure the trade deficit.


Early U.S. copper futures fluctuate with dollar

U.S. copper futures at the New York Mercantile Exchange's COMEX division fluctuated in early business on Friday, with the market taking its short-term cue from the volatile swings in the U.S dollar, traders said.


Tuesday, April 8, 2008

Dollar in Small Dip after Fed Minutes Released

The dollar pretty much shrugged off the news from the Federal Reserve minutes released today, which had an outlook of contraction in the short term for the U.S. economy.

"There was little dollar reaction to the [Fed] minutes, where the key takeaway was the Fed's concern over the potential for a severe downturn," analysts at Action Economic said in a note.

Even the continual poor U.S. housing market didn't rattle the greenback today, as it only declined slightly on the dollar index, dropping 0.3 percent to 72.20. Before the Fed minutes were released, the index stood at 72.23.

The housing report showed pending home sales had declined by over 21 percent from the February 2007.

Against the euro, the dollar fell to $1.5731 before the data was released, where it stood at $1.5717 before. For the yen, the dollar rose by 0.03 percent to 102.36, in contrast to 103.41 before the reports were released.

Friday, April 4, 2008

Weekend Eye on the U.S. Dollar

Dollar News around the Web


Dollar Falls Versus Euro as Job Losses Raise Recession Concern

The dollar fell against the euro and dropped the most versus the yen in a week as a government report showed the U.S. lost jobs for a third straight month in March, increasing concern the economy is falling into a recession.


U.S. payrolls data push down dollar

The U.S. dollar fell to session lows Friday after the economy lost more jobs than economists had forecast, putting a renewed spotlight on worries about the depth of the U.S. economic downturn.


50 million Zimbabwean dollar is one US dollar

The Reserve Bank of Zimbabwe (RBZ) has introduced a new note worth 50 million Zimbabwean dollar to deal with rampant shortages of cash in an economy that is also grappling with the world's highest inflation rate of over 100,000 percent.


Canadian dollar ends winning week on a lower note

The Canadian dollar closed lower versus the U.S. dollar on Friday as data showed job growth moderated in Canada in March after two solid months, but the currency still ended the week with a 1.2 percent gain.


US dollar futures offer on Indian stock exchange

The US Futures Exchange will start offering today (April 4) the first US-dollar denominated futures contract linked to India’s SENSEX stock index. The USFE has exclusively licensed the Bombay Stock Exchange’s benchmark SENSEX Index for US dollar-denominated futures trading.


The falling dollar and remittances

The impact of the dollar depreciation on remittance flows to developing countries has emerged as a serious subject of study amongst economists and policy analysts. In particular, the impact of remittance flows for the Philippines, Mexico and India, the three countries among the largest remittance-recipients, is of immediate concern for economists and policy planners.


Thursday, April 3, 2008

Volatility Should Continue for U.S. Dollar

The U.S. dollar was mixed today, as it fell strongly against the Canadian and Australian dollar, and the British pound.

It did manage to gain against the euro based on Eurozone Retail Sales, which fell by 0.5 percent. It also gained strongly against the New Zealand dollar, as the ANZ Commodity Price index reached a record high.

We'll get a better picture of the effects on the U.S. dollar with the various reports set to be released on Friday, as Non Farm Payrolls figures will come out, followed by Non Manufacturing Payroll and the Unemployment rate.

A report on the Average Hourly Earnings will also be released, giving a snapshot of the overall, general economic picture.

Wednesday, April 2, 2008

Dollar Falls on Economic Data

Comments from Federal Reserve Chairman Ben S. Bernanke that the U.S. economy could possibly contract in the first half, caused the U.S. dollar to slide against the euro for the first time in three days.

"Bernanke confirmed what the market is feeling about the economy," said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon. "It put some pressure on the dollar."

Against the euro, the U.S. dollar dropped by 0.5 percent to $1.5695 in New York, down from $1.5614 yesterday. Other major currencies it fell against were the English pound, Brazilian real, Icelandic krona, Australian dollar, South African rand and the Norwegian krone.

Most traders say there is about an 88 percent chance the Fed will cut the lending rate by a quarter-percentage point on its April 30 meeting. They also say the chances of a half-percentage point cut stand at 12 percent.

Tuesday, April 1, 2008

U.S. Dollar Gains Triggering Commodity Selling and Losses

The U.S. dollar gained some strength today, as manufacturing data from the United States, as well as retail sales in the U.S. increasing last week helped prop it up.

News of the Swiss Bank UBS and Deutsche Bank of Germany that they will be writing down $23 billion also helped the dollar out for now.

"We look for the U.S. dollar to generally guide pricing today now that military activity in southern Iraq has subsided and most financial markets are showing some stability," said Jim Ritterbusch, president of Ritterbusch & Associates.

Commodities were widely down, as oil, gold, copper and wheat all fell on the dollar's rise. It was the third straight day that oil fell.

Friday, March 28, 2008

US Dollar News around the Web

Weekend roundup on US Dollar News


Dollar rebounds as U.S. economic growth meets expectations

The dollar rebounded slightly against most major currencies on Thursday as U.S. economic growth in the fourth quarter met market expectations.


Canadian dollar closed 0.29 of a cent lower at 97.90 cents US

The Canadian dollar closed at 97.90 cents US on Friday, down 0.29 of a cent. The U.S. dollar stood at 102.15 cents Cdn, up 0.31 of a cent.


US Dollar Consolidates Losses as Easing Price Pressures Boost Fed Rate Cut Expectations

Rising risk aversion paired with slowing inflationary pressures heightened US dollar volatility as it swayed throughout the trading session. Against the European currencies, the US dollar moved slightly lower against the euro as investors increased their bets of another rate cut by the Fed, while it accelerated against the British Pound as growth prospects look dim for the UK.


Dollar down on US GDP

It was in line with market expectations, which helped promote buying of the US dollar and resulted in the dollar drifting slightly lower from its close on the local session yesterday.


Currency falls on central bank warning

The New Taiwan dollar dropped nearly three-quarters of a percent against the greenback yesterday after the central bank showed its determination to prevent speculative attacks on the local currency, dealers said.


Is the Dollar Depressing Drug Companies?

In the past two weeks, the Federal Reserve cut the primary discount rate from 3.5% to 2.5%, on top of a large rate cut in January. In anticipation of and because of these rate cuts and a worsening economy, the U.S. dollar


Dollar Rises Against Major Currencies Friday

Even though the American economy has shown sluggishness in relationship to consumer spending, the U.S. dollar still managed to climb against the major currencies on Friday.

The Department of Commerce report noted that consumer spending, while growing, was only at a 0.1 percent rate in February. Not including food and energy prices, inflation was fairly tame, also rising by only 0.1 percent in February.

The U.S. dollar gained against the Euro, Canadian dollar and the Swiss franc, among others. It remained the same with the Japanese yen.

Thursday, March 27, 2008

Weakening U.S. Dollar has China Exporters Looking to Other Currencies

Chinese exporters are moving away from the American dollar as rising labor and material costs are cutting into their profits.

The Financial Times cited the CEO of B2B company Web firm, who said that the vast majority of the 700,000 Chinese suppliers are no longer using U.S. dollars to take care of non-U.S. transactions.

"They are moving to euros, pounds, Australian dollars or even quoting prices in renminbi (yuan)," CEO David Wei told the "Times."

Another drawback is when prices are quoted in U.S. dollars, they are now only valid for a seven day period, in contrast to the former 30-60 day periods.

So far in 2008, the yuan has climbed 3 percent against the dollar, but has declined against most other major currencies.

Dollar Returns to its Downward Trend

I don't think anybody really thought there was going to be a sustained rally with the U.S. dollar, as after a brief rally last week had some people almost euphoric and starting to talk as if something big was happening there. Most knew better.

Today the reality of the weakness of the dollar reasserted itself, as it continues its downward spiral.


For the third day in a row the yen increased against the dollar, as Japanese investors brought their money back home as concerns credit problems will spread across the world.

"Repatriation flows are likely to pick up and this will boost the yen," said Takuma Kurosawa, global markets treasurer in Tokyo at HSBC Bank, a unit of Europe's biggest lender. "Financial market turmoil increases Japanese investors' home bias. People are genuinely worried about the U.S. economy."

The yen rose to 98.72 a dollar, up from the 99.20 it was at late Tuesday in New York. Kurosawa added that the yen could trade as high as 95 a dollar next week.


Against the euru, the U.S. dollar fell to near a record low again, as more governments and investors believe the U.S. will have difficulty avoiding a recession. It traded at $1.5806, after the more significant 1.3 percent drop it experienced yesterday.


The Chinese yuan rose to its highest level against the U.S. dollar since it dropped the peg in 2005, reaching 7.01 yuan to one dollar. That's up from the 7.0252 of Wednesday.

With the Chinese seeking to strengthen their currency, it's believe by analysts it'll drop below 7 yuan a dollar in a very short time.

Tuesday, March 25, 2008

U.S. Dollar in Largest Drop against Euro in Two Weeks

Commodity prices have surged again as the U.S. dollar fell the most against the euro in two weeks.

Much of the economic news coming on the same day was a major instigator of the drop in value of the dollar.

Home prices in the U.S. dropped by 16 of 20 regions in the U.S. that were measured, while consumer confidence the country dropped to it lowest in March in five years. Future expectations were at a stunning lowest in 34 years.

"Even though the numbers were so bad, what we are seeing is part of the equity/dollar risk appetite play all of which is suggesting a comfort to take on risk at the expense of the U.S. dollar," said Ashraf Laidi, chief FX strategist at CMC Markets in New York.
Still, according to Laidi, when you consider all the bad news coming, the increase of the euro against the dollar wasn't as significant as it outwardly looks.

At its peak today, the euro increased to $1.5618; up 1.2 percent for the day.

The dollar also fell against the yen, with last results as 100.20 yen, a drop of 0.5 percent. The Swiss franc also increased against the greenback, with the dollar falling 1 percent to 1.0079 francs.

Falling U.S. Dollar Impetus behind 3 New Barclay ETNs

Saying investors continue to believe the U.S. dollar will continue falling, managing director for Barclay Global Investors, Philippe El-Asmar, said the company will be rolling out three new ETNs in the near future to take advantage of that expectation.

The three new exchange-traded notes will track currencies in emerging markets, the Middle East and Asia.

Investors have already bought in, as the combined notes have generated $150 million in investment, with a month left before the official launch, said El-Asmar.

The names of the new ETNs will be Global Emergin Markets Strategy, Asian and Gulf Revaluation and Intelligent Carry Index ETN.

The Asian and Gulf Revaluation ETN will track Asian and Middle Eastern currencies pegged to the U.S. dollar: Saudi Arabian riyal, the yuan, Hong Kong dollar, Singapore dollar and United Arab Emirates dirham.

With the high price of oil and assumed long term trend of a falling U.S. dollar, it is thought these countries may end up revaluing their respective currencies.

For the Global Emerging Markets Strategy ETN, they'll track 15 currencies through money markets in Latin America, Asia and Eastern Europe.

The Intelligent Carry Index is built to offer market-neutral returns, and will track the 10 most liguid currencies in the world.

Carry trade simply means an institution borrows in one countries with low interest rates and then invests the borrowed funds into countries offering higher interest rates.

The ETN is looked upon as a debt instrument by the Internal Revenue Service, and in a recent ruling in December the IRS determined that single currency ETNs will be taxed as debt.

What that means is they could be taxed at a 35 percent rate rather than the 15 percent enjoyed by long-term capital gains instruments. It taxes will apply even if there's no realized gain, i.e. even if you the notes aren't sold yet.

A ruling on tracking indexed or baskets of currencies hasn't been made yet, so at this time the taxation element in the investment isn't known.

If someone were to invest in these, they would have to take into account the possibility that the ETNS tracking more than a single currency may end up being taxed at the same rate. If that's so, someone could get stuck with high taxes while still holding the notes.

Saturday, March 22, 2008

Dollar Strengthens Against Euro, Yen for First Time in a Month

It's been a month since the U.S. dollar increased against the euro and yen for the week, as the Federal Reserve has battled to increase confidence in the economy and financial institutions in the country.

Along with cutting interest rates, the Fed also offered credit to securities firms, which was a first, as well as allowing a more extensive range of things they'll accept for collateral on loans.

Against the euro, the U.S. dollar increased to $1.5431, up from its March 14 price of $1.5674. It's been over a month since the dollar has reached that level. Against the yen, the dollar reached 99.58, a 1.5 percent increase from its March 14 finish also.

The dollar also gained against the pound, which fell to $1.9818; while it also increased against the Swiss franc, ending at 1.0093.

It also surged against the Norwegian kroner, buying 5.2616, and also with the Australian dollar, which plunged to a five-week low of 90.21 U.S. cents; falling by 3.8 percent.

For the week, the U.S. Dollar Index gained 1.5 percent to 72.71. On March 17 it had fallen to an all-time low of 70.698.

After the commodities fell this week, others believe there will also be drop in the commodity currency market also.

Thursday, March 20, 2008

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