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.