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.
True, in the long run it would be good, in the short run very painful, even ANWAR (about 5% of our present needs) would take around 3-5 years. But what will kill us as a nation is not a natural correction, it is the fact that our "conservative" Congressmen and Bush & Co spend like leftists. The borrowing to keep their addictions going is already killing us and will bury this nation and all those shiny tanks we have everywhere will have to come home. Our government, both sides of thieves, are killing our economy but refuse to stop.
I am studying for my MBA and I can tell you from reading dozens of cases, they are not. The average American company is pathetically run with massive organizational problems. I can only imagine how badly the EU companies are run. From the few speeches and cases I've seen it's even worse.
Wait -- that's not my quote, is it?
I went last year to a speach and tour of the new "green" building complex built by the Environmental Agency of my state. Their IT building had $150,000 worth of solar panels. On the best and brightest day, it generates 10KW electricity. Yup, that's it.
Countries like Russia will benefit, because they build over 70% of their own merchandise and the average debt carried per person is $20, or about 2 days of salary.
Be careful for what you wish...
The main solution is the one no one in DC will take until it is to late, and it almost is, if not already: STOP SPENDING BEYOND YOUR MEANS!!!
G-8, Russia's economy by PPP is larger then Italy and Canada and within the next 2 years should be larger then France and Britian. But they too now have stopped supporting the dollar.
Reuters anti American rant.
A super strong Euro is great for America.
Silver is at the bottom of a monster rise due to a huge annual production deficit. Normally trading at an ~16 to 1 ounce ratio to gold (for around 3000+ years) that ratio is currently about 65 to 1. Good leverages on it are SSRI, WTZ and Mines Management (MNG? symbol changed recently). Do that homework :-)
If you adjust the current rise to account for dollar decline it's pretty much a flatline.
And when realestate craters here and people revalue those property taxes the state will think of the current budget nastiness as being "flush with dough"!
That's recall as in "remember".
Standard really hurt. Prior to 71 Gold was held at $35.00 oz (artificially low) and when they started to let the dollar float gold went way up and the dollar crashed.My Maxist Economics professor had brought an old TV with a brick through the screen to class one day. The lesson of the day was the America and the Gold Standard.
He said when Uncle Walter announced Nixon's move he was so pissed he grabbed a brick and threw it at his TV.
He should have loved it if he was a Marxist. Just another means for the state to suck out the life of the middle class.
Also, Nixon went off the standard because they were already printing dollars far in excess of what the gold we had backed. The French started emptying Ft. Knox with their surplus dollars and Nixin went off rather than see the government impose and fiscal restraint...
Remember all.. (Economics 101), the value of an item is based on what someone will pay for it. A little house in California is being purchased today for $500,000, so it's "worth" $500,000. But if some unforeseen events suddenly cause people to offer only $200,000 tomorrow for the same house, then it's worth only $200,000.
"The spirit of manufacture has taken deep root among us, and its foundations are laid in too great expense to be abandoned." --Thomas Jefferson to Pierre Samuel Dupont de Nemours, 1809. ME 12:294
...form next time, it is my request please mention UNITED STATES as our/my country (instead of this country)
That's an interesting quote. Must have pained Jefferson to write it. It reads almost as a surrender to Hamilton, etc.
The thing is -- the truth of the matter is -- manufacturing is over as we understand it. Even if it were to return, which is doubtful, it would return in deeply changed ways thanks to CAD/CAM and other innovations.
As I've mentioned in other posts, I grew up in a factory town among factory people. I know what it looks like to see a shift of 2,000 or 4,000 people hit the gates at the beginning and end of shifts. Today, except for isolated instances, those days are over. And I say this with confidence, every person I know who has waited for them to come back has suffered greatly.
You are right the French pushed him into dumping the Gold Standard by buying up all the US gold. The problem was much deeper and you can place some of the blame on LBJ for running up debt but Nixon did the same thing. It caught up with us and perhaps Nixon could have found a way to placate the French and somehow ween us off the Gold Standard. As far as the embargo is concerned there is a theory that Nixon, realizing what taking us off the gold standard would do baited the Arabs into the embargo in order to shift the blame for the crappy economy.
BTW-I do not think the professor of Marxist Economics was actually a Marxist. However, the class served as a great critique of Capitalist Economies and it was a very popular class for Math Geeks that during the 1990's made a killing and in 2000 made millions by forcing day traders long in tech stocks.
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