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.
Hey, I hadn't thought of that.....
So where would one put some hedge funds in that senario?
Even in Mississippi you live in a world economy and have to buy imported goods and gas for your car. If you have an ARM your house payments may go up by a third. If you own a house it drops in value every day. If you have a dollar in your pocket it also drops in value each day.
So sorry, the Pubbies are in charge. People in the hi-dollar areas of the Peoples Republik of Kahleefornia can go pound sand.
Nobody forced these folks to pay rediculous prices for postage-stamp sized homes.
Is it any wonder that Carl Marx wrote about the "benefits" of Free Traitorous er Trade?
I feel sorry for these people that got locked into ARMS five years ago.
We have no debts.
We can ride out hard times.
Most cannot. It will be ugly.
I want to thank Grandaddy for the oil wells
And we will be owned by the Euros and Chinese.
Man, I wasn't even thinking about California. Those people are psychotic about homes and home prices.
But here's what I see happening. House prices fall like a stone. Many people find themselves "upside down" on $750 mortgages for homes suddenly worth $400K and below. Banks -- not wanting a bunch of house on their hands -- institute "work out" mortgages for these folks and try to get the gov't to back the refinancing.
If gold continues to run up and the dollar tanks, does the general stock market run or crater?
I just don't get the levitating act we're getting with the stock market. It's looking like a real bull, but where's the value?
More to the point, is Greenspan talking deficit trash and reflating like crazy under the table? Where's all the liquidity coming from that's driving U.S. equities?
Investors' Intelligence is calling this a fool's rally, but we're in the right spot in the decennial business cycle for a big run. The four-year cycle says the party should be over here.
Jerry Favors re-ran Edson Gould's old formulae that successfully forecast the 70's bear blowoff and the end of the secular bear, and based his new calculations on the market break in 2000. He got a blowoff spike low at the end of next year, or early in 2006. Chartcraft/Investors' Intelligence worked right behind him with the same data and got about the same answer. Chartcraft is continuing to say 2005 is looking like a tough year.
Any thoughts?
That's correct.
The CA folks do not live in reality.
Most truly believe their so called "equity"
will continue it's soar. Not possible.
Recall Prop. 13?
It put a limit on the amount property taxes could be
increased each year.
Well, look how CA got around that!
Soaring real estate prices with lots of
folks selling, refinancing, buying over
their heads due to low interest rates.
NOW, they're stuck with HUGE amounts in property taxes.
Oh my.
At $500., husband will have to do some serious thinking!
Which projections did you see?
correction pete, the euros and chinese will own treasuries which ahem ahem will cost half as much to repay with inflationed dollars. They will own 2.5 trillion dollars that appreciates at -3.5% interest for the next 30 years. They can be congratulated on this superb investment.
"Recall Prop. 13? It put a limit on the amount property taxes could be increased each year"
Say that to someone living in California, as I have, and see what kind of response you get. When you say it, be sure there are no sharp or heavy objects nearby.
At least we are not contending with the effects of wage and price controls.
I think our economic situation today puts us in a better situation that 1974.
Nope, gambling is not my thang.
Got to figure that the losers have built those fancy casinos.
My very point:
they're paying property taxes on an inflated amount.
When the housing prices fall, the taxes will remain as
they are: HIGH!
That's what they WE have to fight.
Nobody forced people to take out hi-dollar mortgages; nobody forced banks to make the loans.
Risk is integral to our system.
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