Updated March 27,2008
| Dollar pressured anew by weak US data27-Mar-2008 The dollar faced fresh pressure Wednesday amid weaker-than-expected US economic news combined with a strong German business survey and hawkish comments from the European Central Bank.The euro vaulted to 1.5845 dollars at 2100 GMT, up from 1.5647 dollars in late New York deals Tuesday, approaching its all-time high of 1.5905 dollars on March 17.The dollar was quoted at 99.11 yen, down from 99.98 yen.The greenback was hit by figures showing that US durable goods fell 1.7 percent in February, contrary to forecasts for a gain of 0.7 percent, while new home sales were down 1.8 percent. The durable goods negative surprise came at a particularly vulnerable time for the dollar, following hawkish comments by (ECB chief Jean-Claude) Trichet and a stronger-than-expected German IFO survey. With sentiment turning back against the dollar, the rally appears to have been cut short with (sellers) looking for fresh catalysts to drive the dollar back towards new lows . Germany's Ifo institute business climate index climbed to 104.8 points in March from February's 104.1, confounding analyst expectations for a fall to 103.4 points.Meanwhile Trichet reinforced his message that eurozone interest rates will remain on hold while inflation is a risk. Trichet continues to remain hawkish, noting that the ECB's primary concern is inflation. Trichet helped allay speculation of a rate cut ... The short term for the euro appears quite bullish, as there were no new warnings regarding the strength of the euro Economists had been expecting the US economic slowdown and turmoil on the financial markets to have weighed on confidence in the eurozone's largest economy but the Ifo reading suggested strong underlying resilience.Dealers said the US home sales figures were slightly better than expected but this was not enough to stem the tide against the dollar.In late US trade, the dollar stood at 0.9891 Swiss francs from 1.0049 Tuesday.The pound was at 2.0081 dollars after 2.0062. — AFP VIA |
U.S. homes prices slump again 2008-03-25
Prices of existing single-family homes slumped in January, according to the Standard & Poor's/Case-Shiller home price index.
| Reuters Tuesday March 25 2008 Prices of existing U.S. single-family homes slumped for the 18th month in a row in January, for a record annual drop, according to Standard & Poor's/Case-Shiller home price index released on Tuesday. The composite month-over-month index of 20 metropolitan areas fell 2.4 percent to 180.65 from December, bringing the measure down 10.7 percent from a year earlier and 12.5 percent from its July 2006 peak. The 12-month drop was the latest in a string of records for the statistic set as the housing market slumped. The previous annual drop, in December, was 9.1 percent. The latest annual decline was just over half of the 20 percent total decline expected by S&P's chief economist, David Wyss, said David Blitzer, a managing director at S&P. Wyss expects prices to hit bottom in early 2009, Blitzer said in a conference call. "Unfortunately, house prices continue to decline and the decline continues to be really nationwide," said Blitzer, who chairs S&P's index committee. Falling home prices have broken the back of the U.S. housing market, which during the housing boom was increasingly financed with risky loans. Homeowners, especially those with little or no equity in their property, are facing a record foreclosures, threatening the economy that some economists say is in recession. House price depreciation accelerated in February, according to FBR Investment Management analyst Michael Youngblood, citing data from data provider LoanPerformance. S&P said its composite month-over-month index of 10 metropolitan areas fell 2.3 percent to 196.06 for an 11.4 percent year-over-year drop. That was also a record, surpassing the previous month's drop of 9.8 percent. Home prices in Las Vegas and Miami fell the most of any region, at 19.3 percent year-over-year. Phoenix, San Diego and Los Angeles also suffered double-digit drops, the S&P index shows. "The weakness is not contained to the bubble areas," said Michelle Meyer, an economist at investment bank Lehman Brothers in New York. "It has spread to the rest of the nation." Another housing index published on Tuesday, from the Office of Federal Housing Enterprise Oversight, showed home prices fell nationally about 1.1 percent from December to January, and 3 percent compared with a year ago. The OFHEO index tracks data from Fannie Mae and Freddie Mac , the two largest providers of funding for U.S. home loans. The S&P indexes include home sales financed by loans that may fall outside Fannie Mae and Freddie Mac guidelines, but are limited to 20 metropolitan areas. VIA |
Updated 25-Mar-08
The Economist October 20th 2007
PDF | 2.4MB
| Weak Dollar explanation........... Tax Code Is Big Reason For Weak Dollar by Ernie Christian and Gary Robbins The inherent strength of the peculiarly American version of free enterprise is shown by how long and how well the U.S. economy has been able to withstand the constant battering by wrong-headed government policies — but the bulwarks are starting to weaken. Once upon a time the "greenback" was the world's premier currency. Now the dollar is cheaper in value than both the euro and the British pound. In recent months, it has twice hit record lows. Every time our currency cheapens, the dollar price of oil and everything we import goes up. With less purchasing power in the global marketplace, we Americans are poorer than we were before. We lose confidence in ourselves and stature in the eyes of others. Currencies rise and fall against one another in international exchange markets on an almost daily basis and for a variety of reasons — including the recent expansion of the money supply by the Federal Reserve. But the long-term weakness of the dollar is fundamentally the result of two failings. First, we Americans do not save enough to meet the economy's requirements for capital investments. We must, therefore, each year acquire from other countries about $700 billion of capital to fill the hole left by our profligacy. Second, and corollary to our lack of saving and investment, we consume more than we produce. We must, therefore, acquire from other countries not only large amounts of their savings but also large amounts of their goods and services. Because our exports (dollars flowing in, goods flowing out) are much less than our imports (dollars flowing out, goods flowing in), there is an oversupply of dollars in the international market that drives down the price. The federal government is strongly implicated in America's spendthrift status, its enormous trade deficit, the weak dollar and the fact that most Americans are less well-off than they should be. More than a hundred years ago, Henry David Thoreau (hardly a right-wing ideologue) had already tumbled to the sad truth about government. He wrote: "The character inherent in the American people has done all that has been accomplished; and it would have done somewhat more, if the government had not sometimes got in the way." Insofar as profligacy is concerned, the federal government leads by example. For 24 of the past 30 years, it has run a substantial budget deficit, having spent more than it takes in in revenue — and when it does so, it reduces national savings. Federal budget deficits are dissaving by the government in the same way that individuals dissave when they spend more than they earn. Most Americans follow the government's example. Those who rebel and who do save and invest are punished with extra taxes. The government has for decades deliberately taxed income that is saved and invested far more heavily than income that is immediately consumed. Gross private savings has been less than gross private investment for 26 of the past 30 years. Not only do taxes on savings and investment weaken the dollar, they slow the growth of the private economy — often costing Americans $3 billion in lost incomes and jobs for every $1 billion of revenue yield to the government. The total cost of tax-induced collateral damage to the economy is about $2.5 trillion per year. Now the Democrats in control of Congress, led by New York Rep. Charles Rangel, are preparing to kick up the deadweight loss to the economy by another $2.9 trillion. That's a $2,600 annual whack for every family in America for the next 10 years — and that's only for starters. To make matters worse — especially insofar as concerns the trade deficit — the government heavily taxes the export of American-made goods, making it hard for companies to compete in the global markets from their home base in America. But when American companies flee this country and operate abroad — because of the penalties on exports or for other reasons — they get a tax holiday from the U.S. government, provided they reinvest their foreign-source profits abroad to the benefit of some other country's economy. Woe be unto them, however, if they bring the money home to reinvest in America. The government will tax them. No wonder the annual U.S. trade deficit is about $0.7 trillion and is equal to nearly 6% of America's entire gross domestic product. And no wonder those in other countries are downgrading their view of the American economy and downgrading the dollar. Christian, an attorney, was a deputy assistant secretary of the Treasury in the Ford administration. Robbins, an economist, served at the Treasury Department in the Reagan administration. Both are adjunct scholars at the Heritage Foundation. First appeared in Investor's Business Daily VIA |
| Friday, February 29, 2008 The dollar plunged to a fresh record low against the euro Thursday amid more glum US economic news and downbeat comments on the outlook from Federal Reserve chairman Ben Bernanke. The single European currency jumped to an all-time high of 1.5229 dollars at one point Thursday. The euro at 2200 GMT was buying 1.5197 dollars, against 1.5119 late Wednesday. The dollar fell to the lowest level in almost three years against the yen Friday after US central bank chief Ben Bernanke warned the economy faced more complex problems than before the last recession, dealers said. The dollar was bidding as low as 104.66 yen in early Tokyo trade, its lowest level since May 2005 when it touched 104.37. It later recovered slightly to 104.78 yen, compared with 105.39 yen in New York late Thursday. The euro broke through the symbolic 1.50-dollar barrier on Tuesday for the first time since its creation in 1999 and topped 1.52 dollars for the first time Thursday. The greenback also sank against the other major currencies, nearing the level of 105 yen. Michael Woolfolk at Bank of New York Mellon said he sees little hope for a dollar rebound. "Players will be looking for further opportunities to sell the dollar in an effort to map out the new trading ranges for the majors," he said. "While fair value for the euro remain sub-1.45, it is unlikely to see this level until one of two things happens: clear signs that the US economic recovery is in place or clear signs that the ECB (European Central Bank) is prepared to cut interest rates. At this point, both seem out of the question until at least mid-year." In late New York trade, the dollar stood at 105.30 yen from 106.45 Wednesday and 1.0512 Swiss francs after 1.0630. The pound climbed to 1.9899 dollars from 1.9815. — AFP The dollar plunged to a fresh record low against the euro Thursday amid more glum US economic news and downbeat comments on the outlook from Federal Reserve chairman Ben Bernanke. The single European currency jumped to an all-time high of 1.5229 dollars at one point Thursday. The euro at 2200 GMT was buying 1.5197 dollars, against 1.5119 late Wednesday. The euro broke through the symbolic 1.50-dollar barrier on Tuesday for the first time since its creation in 1999 and topped 1.52 dollars for the first time Thursday. The greenback also sank against the other major currencies, nearing the level of 105 yen. The US currency remained under pressure as Bernanke testified in Congress for a second day on the central bank's semiannual economic report. The Fed chief, who gave strong hints of more rate cuts by the central bank, said the US economy faces a different and more complex set of issues than the recession in 2001. "We are facing a situation where we have simultaneously a slowdown in the economy, stress in the financial markets and inflation pressure coming from these commodity prices abroad," Bernanke said. "Each of those things represents a challenge. We have to make our policy in trying to balance these different risks in a way that will get the best possible outcome for the American economy." Analysts said the comments highlighted problems facing the US economy. "The broader story is that the dollar remains under heavy pressure because of the Federal Reserve's decision to cut US interest rates aggressively, even as many of the major foreign central banks continue to resist cutting their rates," said Patrick Fearon, economist at AG Edwards. "Given the dollar's negative near-term fundamentals, we expect it to keep falling for a while yet." But Fearon said the greenback is getting oversold, "and we continue to believe that the dollar could rally temporarily at some point in 2008 if the aggressive monetary and fiscal stimulus policies being put into place in the United States start to boost the US financial markets or slowing economic growth finally prompts substantial rate cuts abroad." The US government meanwhile reported that the economy expanded at a sluggish 0.6 percent annual pace in the fourth quarter. Analysts had expected a slight upward revision to 0.8 percent for the quarter, which remains the weakest since late 2002. In a separate report, the Labor Department said new claims for unemployment benefits in the week to February 23 rose by 19,000 to 373,000, signalling a softer job market and potentially weaker conditions overall. "With initial jobless claims getting closer to the 400,000 a week mark, the odds clearly favor a recession at some point in the first half," said Paul Ashworth, a senior economist at Capital Economics. Michael Woolfolk at Bank of New York Mellon said he sees little hope for a dollar rebound. "Players will be looking for further opportunities to sell the dollar in an effort to map out the new trading ranges for the majors," he said. "While fair value for the euro remain sub-1.45, it is unlikely to see this level until one of two things happens: clear signs that the US economic recovery is in place or clear signs that the ECB (European Central Bank) is prepared to cut interest rates. At this point, both seem out of the question until at least mid-year." In late New York trade, the dollar stood at 105.30 yen from 106.45 Wednesday and 1.0512 Swiss francs after 1.0630. The pound climbed to 1.9899 dollars from 1.9815. — AFP The dollar plunged to a fresh record low against the euro Thursday amid more glum US economic news and downbeat comments on the outlook from Federal Reserve chairman Ben Bernanke. The single European currency jumped to an all-time high of 1.5229 dollars at one point Thursday. The euro at 2200 GMT was buying 1.5197 dollars, against 1.5119 late Wednesday. The euro broke through the symbolic 1.50-dollar barrier on Tuesday for the first time since its creation in 1999 and topped 1.52 dollars for the first time Thursday. The greenback also sank against the other major currencies, nearing the level of 105 yen. The US currency remained under pressure as Bernanke testified in Congress for a second day on the central bank's semiannual economic report. The Fed chief, who gave strong hints of more rate cuts by the central bank, said the US economy faces a different and more complex set of issues than the recession in 2001. "We are facing a situation where we have simultaneously a slowdown in the economy, stress in the financial markets and inflation pressure coming from these commodity prices abroad," Bernanke said. "Each of those things represents a challenge. We have to make our policy in trying to balance these different risks in a way that will get the best possible outcome for the American economy." Analysts said the comments highlighted problems facing the US economy. "The broader story is that the dollar remains under heavy pressure because of the Federal Reserve's decision to cut US interest rates aggressively, even as many of the major foreign central banks continue to resist cutting their rates," said Patrick Fearon, economist at AG Edwards. "Given the dollar's negative near-term fundamentals, we expect it to keep falling for a while yet." But Fearon said the greenback is getting oversold, "and we continue to believe that the dollar could rally temporarily at some point in 2008 if the aggressive monetary and fiscal stimulus policies being put into place in the United States start to boost the US financial markets or slowing economic growth finally prompts substantial rate cuts abroad." The US government meanwhile reported that the economy expanded at a sluggish 0.6 percent annual pace in the fourth quarter. Analysts had expected a slight upward revision to 0.8 percent for the quarter, which remains the weakest since late 2002. In a separate report, the Labor Department said new claims for unemployment benefits in the week to February 23 rose by 19,000 to 373,000, signalling a softer job market and potentially weaker conditions overall. "With initial jobless claims getting closer to the 400,000 a week mark, the odds clearly favor a recession at some point in the first half," said Paul Ashworth, a senior economist at Capital Economics. Michael Woolfolk at Bank of New York Mellon said he sees little hope for a dollar rebound. "Players will be looking for further opportunities to sell the dollar in an effort to map out the new trading ranges for the majors," he said. "While fair value for the euro remain sub-1.45, it is unlikely to see this level until one of two things happens: clear signs that the US economic recovery is in place or clear signs that the ECB (European Central Bank) is prepared to cut interest rates. At this point, both seem out of the question until at least mid-year." In late New York trade, the dollar stood at 105.30 yen from 106.45 Wednesday and 1.0512 Swiss francs after 1.0630. The pound climbed to 1.9899 dollars from 1.9815. |
| Friday, February 29, 2008Demand surge regardless & Oil jumps to record highs on sliding dollar New York's main contract, light sweet crude for delivery in April, shot up 2.95 dollars to close at a record 102.59 dollars per barrel, just two days after the prior record of 100.88 dollars. Driving oil prices higher was the dollar's plunge to an all-time low against the euro, making dollar-denominated crude oil cheaper for investors using stronger currencies. The euro on Thursday crossed 1.52 dollars for the first time.In London, Brent North Sea crude for April advanced 2.63 dollars to settle at an all-time high of 100.90 dollars a arrel, after striking an intraday record of 101.27 dollars. The spiking oil prices have stoked inflation in the United States, the world's biggest energy consumer, raising concerns about the Federal Reserve's interest-rate slashing campaign aimed at spurring sluggish growth. Normally economic weakness in the world's biggest economy would be expected to weigh on oil prices because it would lower demand for oil, but the dollar's decline appeared to trump such concerns, analysts said. "Larger market forces have rewritten the laws of gravity as commodity price inflationary pressures have over-ruled the basic laws of supply and demand," said Phil Flynn at Alaron Trading. "Even with clear signs of demand destruction in the US and some worrying signs of slowing in Japan and even Europe, oil prices have surged along with inventories." "Lately the focus has been on inflation as the Fed printed more and more dollars and thus we saw the value of the greenback fall, driving up those wonderful commodity prices," he added. Michael Fitzpatrick at MF Global said that any technical correction could be limited by the dollar's downward spiral, "attracting more speculative buyers to the crude oil market." "Aggressive buying behavior by investors into commodity markets, including energies, will probably not be shelved anytime soon, especially since inflation fears have been stirred up again, as investors continue to seek diversification," Fitzpatrick said. Runaway price levels have sparked widespread speculation that OPEC, the crude exporters' cartel, will maintain current output levels at a keenly awaited production meeting next week, analysts said.A top official from OPEC member Nigeria said that the cartel was unlikely to cut output if prices remain around record levels. "If prices don't fall, I don't think that they will lower their production now," an oil adviser to the Nigerian president, Rilwanu Lukman added."If prices remain between 90 and 100 dollars, I think it is unlikely that they do something," he said. Concern that OPEC could reduce output has been one of the factors driving prices above 100 dollars this week, analysts said. Many oil industry experts now expect that OPEC will hold its official daily output at 29.67 million oil barrels. |
Thursday, February 28, 2008 Asian stocks were broadly higher yesterday, boosted by a stronger US market on Tuesday 26, while commodities and currencies also rallied.Mr Yeo Chin Tiong, head of treasury at OSK Investment Bank in Kuala Lumpur, added: "There will be a flight of capital to this region because of growth and returns are more attractive.''Commodities, led by crude oil, gained after the US dollar slumped to a record low of US$1.5050 ($2.09) against the euro on Tuesday. Crude oil prices remained above US$100 a barrel yesterday, propelling other commodities higher. Gold hit a record high of US$956.50 per ounce before retreating off that level slightly. February 23, 2008-Asian stocks headed for their seventh weekly decline this year on renewed concern the world's biggest economy is entering a recession. "A large part of the region's exports are shipped to the US so it's hard to see a sharp decoupling," said Mr Jonathan Ravelas, strategist at Manila-based BDO Unibank. "Who will buy these goods if US consumers suffer?"US recession/credit market turmoil, will likely dampen market sentiment, turnover and asia bourse ('stock exchange') supportable valuations". |
Dollar at record low vs. euro Feb 2008
The U.S. dollar hit $1.51 to the euro for the first time on record, and fell to historic lows against a basket of currencies, as weak data suggest more.
The euro is 30 percent above its debut level, and up 84 percent from a record low of 82.30 U.S. cents in October 2000.
The currency headed for its biggest monthly loss against the euro since September as a cooling economy prompted traders to bet the Federal Reserve will cut interest rates at least twice more this year. The dollar is the second-worst performer this month among 16 major currencies against the euro after Fed Chairman Ben S. Bernanke said the dollar's depreciation is ``a positive factor'' for reducing the U.S. trade deficit.
The U.S. currency declined to 104.67 yen, the weakest since May 2005, before trading at 104.88 yen as of 9:24 a.m. in Tokyo, from 105.37 yen in New York late yesterday. It traded at $1.5188 per euro, from $1.5193 in New York late yesterday, when it touched $1.5229, the weakest since the euro began trading at about $1.17 in January 1999.
The dollar may fall to $1.5230 per euro today (Tokyo, Feb 29 09:50), Kato forecast.
The dollar also hit floating-era lows against the Brazilian real and New Zealand dollar, or "kiwi." The British pound soared to $1.9862 from $1.9667 late Monday, while the dollar fell to 107.26 Japanese yen from 108.07 yen.
The dollar fell to a floating-era record of 1.6805 Brazilian reais, according to Gilmore. It rose to settle at 1.6857 Brazilian reais, he said, its highest close since the real was floated in May 1999. Brazil's benchmark interest rate, at 11.25%, offers investors high yields.
Meanwhile, the New Zealand dollar soared to a second high in as many days of 81.58 U.S. cents per kiwi, according to Dow Jones' Interbank foreign-exchange rates. The kiwi settled at 81.53 U.S. cents from 81.01 U.S. cents on Monday, when it set its previous high of 81.15 U.S. cents.
It is the kiwi's highest level since it began trading freely against the dollar in 1985. The New Zealand currency has benefited from soaring prices of its commodities and a high interest rate of 8.25%, as has Brazil's real.
The real and kiwi are beneficiaries of the carry trade, which involves borrowing currencies from countries with low interest rates, such as Japan, and investing the funds in higher-yielding assets elsewhere. Carry-trade beneficiaries are often the euro and currencies of countries with high interest rates.
In other New York trading, the dollar fell to 1.0759 Swiss francs from 1.0889 Swiss francs. The dollar also slumped to 98 Canadian cents from 99.72 Canadian cents.
| Dollar decline tracks U.S. fall from grace Fri Apr 27, 2007 The dollar is perhaps the biggest problem. As a net debtor, the United States must attract some $3 billion every working day to finance a gaping current account deficit that in 2006 amounted to 6.5 percent of gross domestic product. Economic rivals such as China and Japan, on the other hand, boast massive surpluses. Since Americans also spend more than they save, the money to cover the U.S. deficit must come from foreign lenders such as central banks. China, which holds more than $1 trillion in foreign currency reserves, is one of the biggest creditors. That's increasingly possible because euro-denominated debt today accounts for a bigger share of the international bond market than do dollar-based securities. As the dollar has steadily weakened over the last year, the value of the dollar-denominated assets held by central banks has also declined. The trend may motivate foreigners to start holding more euros instead, exacerbating pressure on the dollar and leading to faster U.S. inflation and a declining standard of living. While a weaker dollar may boost U.S. exports and the profits of U.S. companies with overseas operations, weaker foreign demand for U.S. Treasury bonds would push up long-term interest rates, raising mortgage payments for U.S. homeowners and borrowing costs for an indebted government. There is a potential upside to the dollar's fall. For one thing, its decline would help shrink the massive U.S. trade deficit. Read More VIA |
Dollar Falls to 2 1/2-Year Low Against Yen Before Spending Data
Yen Near Record Low Versus Euro as Investors Add to Carry Trade
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