Posted on 11/10/2006 8:33:03 AM PST by GodGunsGuts
Dollar Drops as China to Diversify Holdings
MoneyNews Friday, Nov. 10, 2006
LONDON -- The dollar sank to a two-month low on Friday after further comments from China's central bank governor Zhou Xiaochuan on the bank's plans to diversify its $1 trillion in currency reserves, while European and Asia shares fell amid soft economic data.
Already under pressure after a weak reading of U.S. consumer sentiment, the dollar extended Thursday's losses after Zhou said China had a clear plan to diversify its FX reserves.
Zhou, speaking at a meeting of central bankers in Frankfurt, said diversification would include different currencies and investment instruments. Although Zhou said there was no change to China's long-standing diversification policy, many traders took his comments to mean China might buy fewer dollars as the country's massive current account surpluses swells its coffers.
"Undoubtedly, the dollar has weakened on the comments. But on the basis of the comments in and of themselves, I wouldn't expect the dollar to continue weakening," said Todd Elmer, currency strategist at Citigroup.
"I'd expect the trend of reserve diversification to be unfavourable for the dollar over time, but we have to be cautious. I'm not sure this rhetoric means you should chase the dollar weakness, but I wouldn't expect significant dollar rebound in the near term," Elmer said, citing interest rate differentials in the coming weeks that are unlikely to be dollar-positive.
The dollar hit its lowest level in more than two months against a basket of major currencies and touched a 2-1/2 month low against the euro at $1.29 per euro.
The dollar and other currencies also came under pressure against the yen overnight after Bank of Japan Governor Toshihiko Fukui said he was concerned about a sharp unwinding of carry trades in which investors borrow the low-yielding Japanese currency and buy higher yielding currencies.
The dollar was buying 117.35 yen.
SHARES DIP
The FTSEurofirst 300 was down 0.1 percent at 1,465.3 points, off Thursday's 5-1/2 year high as weakness in pharmaceutical stocks in particular weighed.
Concerns that drug companies may eventually face price controls from the U.S. government have arisen since Democrats won both the House of Representatives and the Senate in U.S. mid-term elections.
"The view is that for the next little while, that will be a headwind to drug companies in the U.S. It's a sentiment thing," said Stephen Dowds, head of international equities at Northern Trust.
AstraZeneca was down 2.2 percent and rival GlaxoSmithKline fell 1.7 percent.
However, equity markets overall looked attractive, with solid growth and reasonable company earnings, Dowds said.
"Corporate balance sheets are very strong, people are looking for growth and there's a lot of cash sitting on the sidelines in either private equity hands or even in quoted companies' balance sheets."
Data showing the French economy unexpectedly stagnated in the third quarter did equities few favours, while weaker-than-expected machinery orders in Japan helped push the Nikkei to a one-month closing low of 16,112.4 points.
EURO ZONE BONDS FIRM
The prospect of China diversifying further out of dollar denominated assets proved a boost for European government bonds on hopes they might attract more Chinese buying, but analysts noted it was a gradual process.
"It's been an issue for months. We are certainly seeing some diversification into euro zone bonds, but I don't think it's on as big a scale as many people think," said ING's Padhraic Garvey.
The December Bund future rallied to test key resistance at 118.00, up 18 ticks, while the 10-year note was yielding 3.718 percent.
Gold edged up as the dollar weakened and as investors speculated China would diversify into bullion or other commodities.
Zhou said diversification included currencies and investment instruments including emerging markets but asked if this included gold, he said: "That's a separate thing."
Spot gold was trading around $634 an ounce, having touched a two-month peak around $636.50.
Oil prices retreated, giving up most of Thursday's gains as traders booked profits. The International Energy Agency (IEA) noted that inventories in OECD nations had risen at a rate of 1.15 million barrels per day during the third-quarter, the highest third-quarter build in 15 years, but also predicted a jump in demand during the current quarter.
U.S. light crude was down 72 cents at $60.44 a barrel.
These insulting threads are all about driving sheep to slaughter. Fools are supposed to read their crap and panic.
I think you missed the point of the graph. It is comparing the entire period of 1949 to 1979 (not just 1979) to the period of 1979 to 2001. If the graph is true, I'd say the shift in income distribution is nothing short of stunning.
You're changing the subject? That was quick.
From 2003 to 2004, the income share of everyone below the top 1% (or the bottom 99%) dropped 2.2%
I never liked the statistic "share of total U.S. income". Sounds like a stat a Communist might like. You know, from each according to be ability to each according to his need.
If I work 80 hours a week would it surprise you if I made more money than someone who worked 40 hours a week? Would you be surprised if I made more than someone who only worked 20 hours a week?
That stat makes it sound like there is a fixed pile of money, those nasty rich people are taking more than their share, never mind the work that may be involved.
The CBPP article you linked to said that the bottom 99% of households saw their average income grow by 2.3%, after inflation.
In short, our economy is very unbalanced
Maybe it'd be more balanced if everyone made exactly the same income?
which is not surprising given the fact we are exporting so many jobs (mostly to COMMUNIST CHINA)
How many jobs did we export to China? If we'd kept those jobs, would our unemployment be 3%? 2%? 0%?
that have traditionally been held by our dwindling middle class
I thought you didn't want to focus on the middle class?
If I were to guess, I would imagine that the majority of income gains in the top 1% is in the area finance.
Yes, I've done very well in the last few years. Did I take more than my share of "total U.S. income"? Did I take some of yours?
The only fools on this thread are those who follow your lead and bury their heads in the sand.
Bzzzzzzzzzzzzzzzzzzt.
Gigi concedes Toddsterpatriot's point by providing a "non-answer answer."
Your chart doesn't show what you think it shows.
Shill on, creep.
"iTulip.com" ????
The combined viewership of this website (minus a few mouth-breathing goldbugs) is LAUGHING at you.
Maybe he shouldn't link to a site that Krugman likes so much?
"[The Center's] statistical work is absolutely impeccable; there is nothing at all like it on the right, or anywhere else. . . . If you care about [fiscal issues], check CBPP's site regularly for updates."
Paul Krugman, New York Times columnist,
in a May 28, 2003 column on his website listing
websites that are "must reading for anyone interested
in government policy."
It's hilarious and sad, and it supports my theory that Gigi is a high-school student talking a very good game.
I weep for our future. LOL!
LOL
You're citing that socialist Krugman's very favorite site?
Did you know REDS was recently released on DVD? Perhaps you can steal a copy, to crib more Marxist talking points.
Gigi weeps for our past, when capitalists roamed in the wild...
Ooops. You are right, actual income grew by 2.3%, but their income distribution has been steadily declining. As the graph in post #67 clearly demonstrates. I'm not saying that everyone should be equal. What I'm saying is it suggests that we have a very unbalanced economy that is shriking our middle class.
Ooops. You are right, actual income grew by 2.3%, but their income distribution has been steadily declining. As the graph in post #67 clearly demonstrates. I'm not saying that everyone should be equal. What I'm saying is it suggests that we have a very unbalanced economy that is shriking our middle class.
Ooops. You are right, actual income grew by 2.3%, but their income distribution has been steadily declining. As the graph in post #67 clearly demonstrates. I'm not saying that everyone should be equal. What I'm saying is it suggests that we have a very unbalanced economy that is shriking our middle class.
Ooops. You are right, actual income grew by 2.3%, but their income distribution has been steadily declining. As the graph in post #67 clearly demonstrates. I'm not saying that everyone should be equal. What I'm saying is it suggests that we have a very unbalanced economy that is shriking our middle class.
Sorry Gigi, it says "From 2003 to 2004, the average incomes of the bottom 99% of households grew by 2.3%, after adjusting for inflation.
Don't you hate it when you disprove your own point?
If the graphs are correct, are you ok with an economy that results in a steadily declining middle class?
You're funny.
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