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.

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