Posted on 10/04/2005 3:50:59 AM PDT by RWR8189
LONDON (Reuters) - The dollar remained firm on Tuesday near this week's three-month highs against the euro and 16-month peaks versus the yen as a Federal Reserve official joined the hawkish chorus on U.S. interest rates.
The dollar also hit a two-month high against sterling and against an index of major currencies as investors priced in prospects for the Fed to press ahead with its 15-month credit-tightening campaign.
Atlanta Fed President Jack Guynn told Reuters in an interview on Monday that the Fed's tightening campaign still has "a ways to go" before completion.
Analysts said strong data, equity inflows and bond yields were also helping the U.S. currency. Rising U.S. Treasury bond yields have drawn increased international investment.
"Yields are the main factor driving driving flows. The key factor supporting the dollar is expectation of higher rates and acceleration of inflation expectations," said Lena Komileva, market economist at Tullett Liberty.
By 0956 GMT, the euro was slightly higher on the day at $1.1935 after struggling to break support near $1.1900, close to its lowest level in three months.
The euro was little moved by inflation data that showed euro zone producer prices rose 0.4 percent in August from July, in line with market expectations.
The dollar was 0.16 percent higher at 114.29 yen, close to a 16-month high marked near 114.40 yen on Monday.
"Markets are looking again to challenge the lows of the year in euro/dollar, which were approached yesterday. People are tempted to look at those levels again," Dresdner Kleinwort Wasserstein currency strategist Tim Fox said.
Traders said the dollar might have trouble pushing higher as Japanese exporters are hoping to sell the U.S. currency above 114.50 yen. Resistance was seen at 114.90 yen, the May 2004 high above which would be a two-year peak.
Sterling also hit a fresh two-month low at $1.7514.
Analysts said insatiable demand from Japanese investors for higher-yielding foreign bonds had pressured the yen, which hit a seven-year low against the Australian dollar and an eight-year low versus the New Zealand dollar.
FED CHORUS
Other Fed officials are expected to weigh in on the need for more inflation-fighting rate raises. Dallas Fed President Richard Fisher and Philadelphia Fed President Anthony Santomero speak on the economic outlook later on Tuesday, at 1745 GMT and 2300 GMT respectively.
The dollar was boosted in the previous session after the U.S. Institute for Supply Management index of national factory activity jumped in September to show much stronger growth than expected, as post-hurricane reconstruction spurred big demand for goods.
A spike higher in the ISM's prices-paid component fanned more concerns about inflation accelerating.
Data last week showed the core personal consumption expenditures index of consumer inflation -- the Fed's favoured gauge -- picking up to a 2 percent year-over-year pace in August, near the top of the central bank's perceived comfort zone.
The Fed's chorus of comments signaling more rate increases ahead has reinvigorated the dollar's hefty rally this year by widening its yield advantage, helping drive the U.S. currency up almost 14 percent against the euro so far in 2005.
St. Louis Fed President William Poole, seen as an inflation hawk, will also talk on the predictability of Fed policy at 1900 GMT and is expected to take questions afterward.
Why hasn't the dollar been climbing? The Fed has been raising rates constantly providing a constant stream of incentives, yet the dollar continues on a net decline. The underlying economy must be a real mess.
Twin deficits accounting for about 8% of GDP...
Uh, it takes a while to turn a hundred car freight train around to erase that "net decline." Doom'n'Gloom!
4% steady growth, 4.5% unemployment rate, 14% increase in Federal revenues (result of tax cut), $100 bln drop in budget deficit. Real mess.
Correction: UR 4.9%, not 4.5%. Anyway, much lower than the best Clinton performance.
>>>Correction: UR 4.9%, not 4.5%. Anyway, much lower than the best Clinton performance.
Just a quick correction. The best Clinton performance was actually 3.8% in April 2000. The rate was at a level of 4.9% or lower for the period from July 1997 through the end of his presidency.
"Why hasn't the dollar been climbing? The Fed has been raising rates constantly providing a constant stream of incentives, yet the dollar continues on a net decline. The underlying economy must be a real mess."
The Fed knows this. The rate raising is purely to keep the dollar from crashing so the foreigners will keep soaking up our paper.
I heard different, 5.3% Clinton's best. But I won't argue until I make sure. Anyway, I also heard that Clinton employment was artificial jobs without actual work, which is good short term, but unhealthy for the economy in the long run.
Sorry, I can't format this, but it is from the BLS
http://data.bls.gov/cgi-bin/surveymost?ln
Series Id: LNS14000000Seasonal AdjustedSeries title: (Seas) Unemployment RateLabor force status: Unemployment rateType of data: PercentAge: 16 years and over
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
1995 5.6 5.4 5.4 5.8 5.6 5.6 5.7 5.7 5.6 5.5 5.6 5.6
1996 5.6 5.5 5.5 5.6 5.6 5.3 5.5 5.1 5.2 5.2 5.4 5.4
1997 5.3 5.2 5.2 5.1 4.9 5.0 4.9 4.8 4.9 4.7 4.6 4.7
1998 4.6 4.6 4.7 4.3 4.4 4.5 4.5 4.5 4.6 4.5 4.4 4.4
1999 4.3 4.4 4.2 4.3 4.2 4.3 4.3 4.2 4.2 4.1 4.1 4.0
2000 4.0 4.1 4.0 3.8 4.0 4.0 4.0 4.1 3.9 3.9 3.9 3.9
2001 4.2 4.2 4.3 4.4 4.3 4.5 4.6 4.9 5.0 5.3 5.6 5.7
2002 5.7 5.7 5.7 5.9 5.8 5.8 5.8 5.7 5.7 5.7 5.9 6.0
2003 5.8 5.9 5.8 6.0 6.1 6.3 6.2 6.1 6.1 6.0 5.9 5.7
2004 5.7 5.6 5.7 5.5 5.6 5.6 5.5 5.4 5.4 5.5 5.4 5.4
2005 5.2 5.4 5.2 5.2 5.1 5.0 5.0 4.9
OK, you got me. But didn't that bubble explode because it was just a bubble? And Clinton's socialist near-full employment reminded me of the good old Soviet Union when millions of people got paid just for picking their noses all day long. Tax everything that moves and create artificial jobs for everybody. Such economies don't last long. Today's growth and unemployment reduction is are a healthy capitalist processes. The market and demand create the jobs that the market really needs. Besides, the Labor statistics only include payroll (business) survey numbers, while at the same time, the Household survey shows a much greater growth of business and self-employed numbers. It is being widely ignored, while for America it's much more importans than """"jobs"""". The weakest Bush ""job"" growth month of 13,000 added 600,000 to the economically active population. I remeber, I wasn't drunk.
Sorry for the rant. 13,000 should read 36,000.
>>>socialist near-full employment? create artificial jobs for everybody?
Why would companies do that? How was growth in the 90's anti-capitalist? Federal government payrolls actually declined during much of that period.
Year Annual Average
1995 2949
1996 2877
1997 2806
1998 2772
1999 2769
2000 2865
2001 2764
2002 2766
2003 2761
2004 2728
2005 2731(August)
Yes the tech bubble did pop? Today's economy may (I stress that it may be, not that it is) be supported by a housing bubble. If it were to pop, would that delegitamize any gains that President Bush has had?
I was not talking about federal government jobs, I was talking about companies. Why would thay do that, because they could. I worked in a private company where there were dozens of people not doing anything. I exactly wondered why my company is keeping them. Clinton's bubble is a fact, Bush's bubble is a conjecture. Cannot compare fant with conjecture. All about if's and an's. Let's wait and see. In the meantime, Katrina and Rita adjusted for, the economy is marching on. Bush has got a lot to do about reducing government spending (although, he's not the only spender, Congress is doing a pretty good job throwing money about) and illegal immigration, but I would not want to go back to Clinton's taxes, where the more I worked the less I got.
>>>Besides, the Labor statistics only include payroll (business) survey numbers, while at the same time, the Household survey shows a much greater growth of business and self-employed numbers.
Actually, the BLS does both the household and the payroll survey. Unemployment is calculated off of the household survey, so it is capturing the newly self-employed.
>>>It is being widely ignored, while for America it's much more importans than """"jobs"""". The weakest Bush ""job"" growth month of 13,000 added 600,000 to the economically active population. I remeber, I wasn't drunk.
The weakest jobs month for Bush under the household survey was August 2001 when the number employed declined by 825,000. Using the payroll survey, the weakest month was March of 2003 when nonfarm payrolls declined by 218,000.
I meant positive growth (+36,000 jobs). And for that month the numbers were viewed separately: 36,000 business survey, 600,000 household survey.
bookmark
I'm still confused by your figures. I understand the two surveys measure separate things, but Bush's best growth month from the payroll survey was April 2004 when the economy posted a gain of 337,000 jobs and an associated household number of 237,000. The best household number was a gain of 1,029,000 employed in January 2003 associated with a 86,000 growth in payrolls.
In some months the payroll number is higher and in others the household number is higher.
Ignore previous post. I now note you said weakest job growth month.
Still, the fact remains that in some months the household survey provides higher numbers, in others the payroll survey shows higher numbers.
Economists tend to focus on the payroll number because being on a payroll implies some level of permanence. For the household number, people are considered employed if they did any work at all for pay or profit during the survey week. This number tends to be more variable.
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