Posted on 11/20/2007 4:40:40 AM PST by DeaconBenjamin
The dollar fell to a record low against the euro on Tuesday as rumours swept the currencies markets that the Federal Reserve was set to deliver an emergency cut in US interest rates.
Traders said the talk was that that the Fed would cut interest rates when it released its new growth forecasts and the minutes from its October meeting at 19.00GMT.
The dollar fell 0.9 per cent to an all-time low of $1.4797 against the euro, dropped 0.7 per cent to $2.0640 against the pound and lost 0.8 per cent to SFr1.1070 against the Swiss franc.
Neil Mellor at Bank of New York Mellon dismissed the speculation, however.
“The Fed will want to keep its options open,” he sad. “By introducing an emergency rate cut, it would send the wrong message out to the market and seriously undermine its credibility.”
Indeed, David Woo at Barclays Capital said the likelihood was that Fed’s economic projections would be more upbeat than expected.
“With the market relatively confident about the prospects for a rate cut in December, the risk is these expectations will be disappointed somewhat, which would be positive for the dollar,” he said.
Meanwhile, stability on Asian equity markets put pressure on the yen as a pick-up in risk appetite saw the yen give back Monday’s gains.
Analysts said heightened risk appetite had prompted renewed demand for carry trades, in which the low-yielding yen is sold to finance the purchase of higher-yielding, riskier assets elsewhere.
The yen fell 0.3 per cent to Y110.10 against the dollar, lost 1.1 per cent to Y162.88 against the euro and dropped 1.1 per cent to Y227.29 against the pound.
However, Derek Halpenny at Bank of Tokyo-Mitsubishi said yen sell-offs were becoming less convincing by the day and he doubted the return of risk appetite would be prolonged.
He said the key signal of impending trouble for the financial markets in August was the sudden loss of liquidity in the money markets that triggered a spike in short-term money market rates.
“The very same development is now taking place again,” he said. “With financial markets in stress again, the scope for yen weakness looks limited.”
Well if that is the case that is the case. You still have yet to say something intelligent to enlighten the rest of the folks here on the present predicament, except to deny there is any problem whatsoever. I wonder if Rubin agrees with your assessment from his lofty perch.
Now, tell me again about how we all had access to 1% money.
You mean a bank will loan money to another bank at a better rate than they'll loan money to you? STFU!
How articulate. What sound argument.
It was 5 trillion dollars in Jan 2001 when he took office. Most of that can be laid at the feet of Lyndon Baines Johnson as the cost of his "Great Society" welfare state. A significant portion of the additional 4 trillion is a continuation of LBJ. Bush certainly deserves criticism for making the socialist giveaways worse with the prescription freebies for old farts.
What do you think the institutions that had access to 1% money did with it? Loan it to credit card customers at 20%?
The 1% money lasted, what, about six months? And almost every transaction involving 1% money was an overnight transaction. So if a bank borrowed at 1% it almost always had to pay that loan back the next day.
I have seen zero% money in the repo market. But that is a stress condition when the street is short some particular bond issue and can't borrow enough of it.
Again, if you can get yourself a charter, build a capital base of about ten billion, stand up and bid when China wants to sell a few billion bonds and withstand the intense scrutiny and balance sheet rules of the regulators then, you too can be a money center bank. Until then your accusations of preferential status are flimsy.
Thank you. You have only been denying this for 300 posts or so.
You're wrong, again.
What do you want us to thank him for? Cutting taxes and growing the economy so that tax revenues increased? How about thanking him for 9-11 from which a war ensued that has cost hundreds of billions.
BTW most of that debt was incurred before Bush was elected. And a lot of it was rung up during Clinton's "surplus" years.
So do you think that is a preferential rate?
Well, in Japan where the Nikkei and real estate were declining so that money was increasing in value relative to assets, no. It was the origin of the Yen carry trade as I understand things, however.
Well the Dow and domestic real estate are declining. Then the dollar is increasing in value relatively?
Maybe. He likes to call me "condescending". I'm not, really. Plus, he thinks you and I work together at Goldman Sachs. LOL.
Now we are arguing over the meaning of words again. We have had two admissions from you. That banks can get money at the federal funds rate, and that I cannot. Furthermore, I am not likely qualified to have money at these rates, ever.
From the dictionary, preferential means : Manifesting or originating from partiality or preference: e.g. preferential tariff rates; disposed to favor one over another.
I think that fits to a "t."
if a bank borrowed at 1% it almost always had to pay that loan back the next day.
Actually, according to the fed, the term is overnight, but these are automatically renewed until canceled.
But what exactly are we arguing about? You are concerned about whether banks get favorable treatment.
Me I am concerned that the Fed inflates the money supply which leads to economic distortions and malinvestment.
I dunno, is it? It buys more real estate, but less oil, french wine and Italian sports cars. Furthermore, the "value" of assets currently possessed is declining relative to our cash position. On balance many of us think we are worse off for it.
And when any of my friends here get ourselves in over our heads a little short on our grocery bills the fed will give us 0% money to see us through our stress when we can't borrow enough?
Why was the "street" short some particular bond issue in the first place? Were they planing on a. making money or b. losing money. When the fed gives them 0% money does this a. increase their losses or b. decrease their losses.
Me, I just want to know from the experts.
Of course the fed doesn’t care whether they make or lose money. I know. They are just watching liquidity in the banking system.
At the time I believe the Fed Funds rate was about 6%. Go figure. Now how do you explain that one? Who gave out the preferential rates, Andy? Huh?
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