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.”
The Fed HAS all the money. Of course they don't care whether they make or lose money. Don't you remember them supporting the dollar in years past? After they came in and bought billions of dollars the value kept going down.
You just told me the federal reserve gave them 0% money because they were under stress because they were short.
I dunno. I guess I have three choices: a. The Federal Reserve; b. The Tooth Fairy. C. Colonel Mustard in the conservatory with the candelstick.
Choices choices choices.
Great, now he's going to show us how little he knows about repos. Then we'll try to educate him and he'll start calling us names again.
No, you're leaving out one of the largest markets in the world. The repo market. It is dealer to dealer and the only relationship to the Fed is that the repo rate derives off of the fed funds rate. You really don't know a lot about this stuff do you? But you don't mind anonymously posting to G-d and everybody what you don't know.
I could tell him about negative rates in stock loan, but he'd start whining about the Fed transferring wealth. LOL!
You mean shorts aren’t just something worn under your pants? LOL.
ChiCom currency. Layman's terms, please. It is not entirely pegged to the buck. There is a little float in there somewhere. Like .1%/some period (month?).
I look at a chart of the China Yuan Renminbi (CNY). In January USDCNY was 7.45. End of August it was 7.41. Is that cheap or expensive? When the ratio goes down, is the yawn weaker or stronger?
The US complained when it was 8 something? I thought we wanted it to be something like 20. What would the US like it to be? More than 8 to the buck?
I know we would like it to float on an open market. If the buck floats and the yawn is tied to the buck, it floats, no?
yitbos
You are referring to CDOs right? Bundled mortgages....not just home mortgages either. It seems commercial mortgages got bundled too though not on the same scale.
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