Posted on 11/27/2004 1:07:30 AM PST by jb6
Dollar Sinks to Record Low for Third Day Thu Nov 25, 2004 06:45 AM ET By Katie Hunt LONDON (Reuters) - The dollar sank to an all-time low versus the euro for a third consecutive day on Thursday and fell to a 4-1/2 year trough on the yen, hit by concerns about U.S. deficits and the view Washington is happy to see a weaker currency.
Warnings from Japanese and European policymakers did little to halt the dollar's slide, which accelerated last week after Federal Reserve chairman Alan Greenspan said U.S. deficits were unsustainable and appetite for U.S. assets was bound to dwindle.
"We have moved into a new stage of the dollar decline and (the dollar's fall) has become one of the policy tools policymakers use. The move is very much a full-fledged policy event. Until policymakers truly protest, what's going to stop the trend?," said Jim McCormick, head of foreign exchange research at Lehman Brothers.
The dollar fell to a record low of $1.3235 per euro by 1130 GMT. Against the yen, the dollar fell as low as 102.41 before recovering a touch to 102.54 yen. It has lost more than eight percent against the yen since late September.
The dollar also set new lows against other currencies -- a nine-year low against the Swiss franc, a 16-year trough on the New Zealand dollar and a nine-year low against a basket of currencies.
Weaker-than-expected data from Europe's largest economy had little effect on the euro. The Ifo research institute's pan-German business climate index fell to 94.1 in November, its lowest since September 2003 and below forecasts.
"Data from the eurozone is largely being ignored. Everyone is running with the trend," said Kristjan Kasikov, currency strategist at Calyon.
SNOWBALLING
Several investment banks cut their dollar forecasts, with JP Morgan targeting the dollar at 100 yen and the euro at $1.35 by the end of this year.
French Finance Minister Nicolas Sarkozy said that the United States must be determined to reduce its deficits so that the currency does not distort trade exchanges.
Japanese officials, worried a rising yen would hurt a recovery in the export-oriented economy, also stepped up their rhetoric.
Bank of Japan Governor Toshihiko Fukui said that recent movements in the foreign exchange market were not stable.
Earlier BOJ Policy Board member Hidehiko Haru said he would pay attention to any negative impact the recent rise in the yen had on the economy.
Japan's top government spokesman Hiroyuki Hosoda said the yen's recent surge did not reflect fundamentals and that authorities would act against rapid currency moves.
"The overiding sentiment on dollar is very, very negative and it's a question of playing chicken with the BOJ as to whether they intervene or not," said Tony Norfield, head of foreign exchange research at ABN AMRO.
Japan has not intervened in currency markets since March, after a record 20 trillion yen ($194.4 billion) of dollar-supporting intervention in 2003.
YUAN TALK
Also pressuring the dollar against the yen was speculation that China may decide to revalue the yuan in the next few days.
The talk mounted on Thursday with the premium on the yuan in the offshore market surging to its highest in more than a year with some analysts saying Beijing could reach a decision at an annual high-level economic meeting this weekend.
It is widely believed that freeing the Chinese yuan from its peg of around 8.28 per dollar will result in an appreciation of the currency and lift other Asian currencies with it.
China has come under heavy pressure from the United States to allow the yuan to appreciate, as some U.S. manufacturers say an artificially cheap yuan hurts jobs and exports.
Later on Thursday, the chief economists of the European Central Bank and the Bank of England are expected to make speeches in separate appearances.
Keep shorting... I wouldn't be surprised to see the euro cost $2.50 in a few years. And that's good for us, and really bad for European Nazis.
On top of this, the government consumes $2.5 billion more each and every day then it collects. It does this by sucking up 80% of the worlds savings (Japan is paying off it's social security off of the interest the US pays on its debt). So, to keep investments coming, interest must go up rapidly, guess what happens then and who pays for all those bankruptcies.
Gold is up.
Morning quote was $452.00 yesterday.
Excellent news.
Glad I bought alot when it was $355 an ounce.
Yep.
My smart husband was buying all he could when it was
between $265-$300. I am getting a lot happier. :)
However, if the dollar continues to fall OPEC will begin demanding payment in Euros forcing Americans to Buy Euros in order to buy oil. This will cause our currency to even fall further.
Can you say $5.00 a gallon gas?
Your gold may become more valuable but the value of your home as well as your cash and investments dwindle.
Good job not falling asleep in that 8:00 Macro Economics class.
Apparently some of these people like the idea of America being owned by the Saudis and Chinese.
Oh and i feel definitly like a Cassandra. No one will listen. Watching all these idiots running up their credit cards (I've got school debt and debt that built up thanks to unemployment ... aka outsourcing) to buy crap they don't need, just makes me shake my head.
Yep, I also got out of the stock market for a while right before the dot bomb. Saved a bundle when everyone else was losing $$$ hand over fist. I warned people but nobody listened.
Not my house.
We're in Mississippi.
No real estate boom here.
GOOD for you!
Wait till the Cali bubble bursts. Their houses are hitting median $500K
I know.
Used to own real property in San Diego.
The prices are ridiculous.
The folks buying are FOOLS!
Uh huh. And when the bubble bursts, it'll be time for some sharp operators to swoop in and pick up some bargains in the forclosure market.
hopefully dollar hits 2 to 1 dollar per euro and stays there for 10 years. This will kill the European Union basicly. It will also kill the deficit more or less by creating an inflation rate that will eat away at the money other countries use to peg their currency by using treasuries and create a negative bond sort of like when the people bought warbonds during ww2 knowing when they mature the money will be semi-worthless.
Welcome back to the 1970's
I remember the 70's and it was no fun.
People who lose their homes will be very, very annoyed. They may be annoyed enough to ask the gov't to step in.
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