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  • U.S. dollar starts the big slide against major currencies

    THE dollar has embarked on a big decline that will see it fall against all leading currencies, according to analysts.

    The plunge is being prompted by America’s $800 billion (£438 billion) current-account deficit, they say.

    The dollar has been under pressure following last weekend’s meeting of G7 finance ministers and central bankers, which emphasised “global imbalances” and said currencies should reflect economic fundamentals. Then China raised its key interest rate to 5.85%, its first hike for months, and Ben Bernanke, the new Federal Reserve chairman, hinted that American rates would pause at 5% after a rise in May.

    Analysts say that without interest-rate support, the dollar will be weighed down heavily by America’s imbalances.

    “I think this is it,” said Tony Norfield, global head of currency strategy at ABN Amro. “The dollar has been supported by high yields but markets are saying that is no longer enough. The question for policymakers is going to be how to manage the dollar’s decline. It won’t be a one-way street but the fall is likely to be biggest against Asian currencies......”

    More.....

  • #2
    Generally, Americans have the indulging habit of spending beyond their means and surviving on credit --- which in a way also create another form of economy altogether, as the spending enable many businesses to keep booming and retaining or adding employment.

    Feeding into this habit is the nations of the world putting their money into America for investment opportunities. While berating the spending habit of Americans, many global investors also realize that America need to be propped up for other nations to keep making money. For example, its as if China has said "its my turn" and making a fast go at it, as the gross trade imbalance in china's favor shows.

    As the Dollar slides, export and tourism will benefit the most, benefitting a section of American business.

    However you cut it, America has become the global engine for the world's economy. No wonder America cannot afford terrorists to hold its interest hostage, here or around the world.
    THERE IS NO SALVATION IN RELIGION.

    "Unless you are 'born' again, you can never get into the kingdom of God" (John 3:3).

    Comment


    • #3
      For two weeks, the dollar has been hammered as foreign buyers shun the US currency.

      As a result, the Canadian "loonie" is at its highest point in 30 years. The British pound is at its uppermost level since last September. Even the closely managed yen is at a six-month peak.

      If the dollar were to continue falling, it could have wide ramifications:

      • It could imperil the economy next year because Fed Chairman Ben Bernanke might have to defend the currency with higher interest rates.

      • A lower-valued dollar makes imports more expensive, possibly ratcheting up the inflation rate. But it could also stimulate US exports, thus providing more jobs.

      • This summer, Americans traveling abroad will feel as if everything is expensive. However, foreigners coming to America will feel as if the country is one giant Wal-Mart.

      Behind the falling currency is a changing global economy. As the US Federal Reserve appears to be near the end of its round of interest-rate hikes, foreign banks are starting to hike their rates - which puts foreign currencies in higher demand, thus making the dollar less attractive. Thursday, in fact, the president of the European Central Bank indicated that rates could rise in Europe next month. At the same time, the giant US trade imbalance has produced a huge outflow of dollars to other countries, as well as the need to finance the ever-bigger US deficit. The deficit has attracted increasing scrutiny, most recently at a meeting of finance ministers in Washington last month.

      In addition, the central banks of some foreign countries, which are key in financing the US deficit by buying US Treasury bills, are now less willing to do so. Instead, they're diversifying their reserve holdings with euros and yen.

      "We seem to have reached a crossroads," says Anthony Chan, chief economist at JPMorgan Private Client Services in Columbus, Ohio. With foreign interest rates on the rise, he says, it will become harder to finance the US current account deficit.....

      The fallout from a falling dollar

      Comment


      • #4
        Originally posted by Theja
        Generally, Americans have the indulging habit of spending beyond their means and surviving on credit --- which in a way also create another form of economy altogether, as the spending enable many businesses to keep booming and retaining or adding employment.

        Feeding into this habit is the nations of the world putting their money into America for investment opportunities. While berating the spending habit of Americans, many global investors also realize that America need to be propped up for other nations to keep making money. For example, its as if China has said "its my turn" and making a fast go at it, as the gross trade imbalance in china's favor shows.

        As the Dollar slides, export and tourism will benefit the most, benefitting a section of American business.

        However you cut it, America has become the global engine for the world's economy. No wonder America cannot afford terrorists to hold its interest hostage, here or around the world.
        That means the nations of the world cannot afford the terrorists
        to hold the interests of USA as hostage!

        Coz, if the engine looses energy, sputters & slows down,
        the economies of the world will also go into a tailspin of depression!

        Comment


        • #5
          Brazil, Russia, India and China, referred to as BRIC group that currently manifests the world's highest economic growth rate, have surpassed G7 countries in their forex /gold holdings for the first time in history.....

          BRIC nations surpass G-7 in forex, gold holdings

          Comment


          • #6
            Let's hope all the nations eventually become economic powers.

            The US which is only a little over two hundred years old as a Sovereign nation has gotten ahead of the rest in the economic race.

            As more nations join in the economic success, wider markets will be created for American products and services to circulate. Of course, these nations will find opportunities in the American market.

            Now some Americans are finding jobs in India.
            THERE IS NO SALVATION IN RELIGION.

            "Unless you are 'born' again, you can never get into the kingdom of God" (John 3:3).

            Comment


            • #7
              Yes, the Indian corporates have grown, matured & become multinationals,
              they have started employing foreigners in India.
              Though very few, in CEO levels.

              The FOREX reserves of India is bulging at US $ 200 billions,
              and growing fast.

              The GDP growth rate is 8% for FY 2005-06.
              Our PM has told that we are aiming at 10 % growth rate next year.

              The big drag is the high price of crude.

              Comment


              • #8
                The US dollar suffered a severe sell-off on Friday, taking it to its weakest level against a trade-weighted basket of currencies since October 1997, as fears about the US current account deficit crossed world markets.

                Worries about US inflation, which have intensified since this week’s meeting of the US Federal Reserve’s rate-setting open market committee on Wednesday, sparked further sharp losses for US stock markets. The Nasdaq Composite fell a further 1 per cent in morning trading after its 2 per cent fall on Thursday.

                US government bonds also suffered, bringing the yield on the benchmark 10-year bond to its highest level in four years.

                The dollar has lost 7 per cent against the euro, yen and sterling since the beginning of April – a slide that will in turn intensify worries about inflation in the domestic economy.

                Traders are concerned about the role that a weaker dollar will almost certainly have to play in correcting the US deficit, which is now about 7 per cent of gross domestic product.

                Marc Chandler, economist at Brown Brothers & Harriman in New York, said: “Precisely what officials feared would happen from the large global imbalances is now taking place in reaction to their clumsy attempt to ‘fix the problem’. Volatility in the capital markets is rising. Global equities are tumbling.....”

                US dollar takes a pounding over deficit

                Comment


                • #9
                  Another week, another set of losses for the dramatically diminishing dollar, which on Friday slumped to its lowest level since October 1997 in trade-weighted terms.

                  The continuing sell-off came amid a series of events that should, in theory, have aided the greenback. The Federal Reserve released a broadly hawkish monetary policy statement, Thursday’s US trade data was far better than feared, and the US Treasury declined to formally cite China for currency manipulation, a ruling that would have been expected to drive further Asian gains against the dollar.

                  Yet sentiment has turned so decisively against the greenback that it still fell, sliding a further 1.1 per cent to $1.2879 to the euro, 2.1 per cent to $1.8897 against sterling and 1.9 per cent to SFr1.2022 against the Swiss franc, hitting new one-year lows against each, and 1.3 per cent to Y110.50 against the yen. The dollar has now lost 6-8 per cent against each of these currencies since the start of April.

                  The selling has been driven by two major factors........

                  Dollar ignores helping hands to continue its slide

                  Comment


                  • #10
                    So..it is the handiwork of Osama-bin-Laden!

                    A new kind of economic warfare.

                    Make the dollar worth one tenth of the present value,
                    inflation will be 1000% in the US,
                    prices will be ten times of the present price,
                    the world will dump the Dollar and take to Dinars & Rials,
                    the balance of payment will become US $ 80 trillion,
                    the US has to pay thro' the nose to buy oil,
                    the economy will go into a tailspin & crash.

                    USA will be destroyed.

                    Allah.. Akbar! What a nice scenerio!

                    Or is it a dream..?
                    Last edited by sania; 14th May 2006, 12:48.

                    Comment


                    • #11
                      I wonder how the US Stock market is doing lately. Nevermind. Got my paper right here...Crap! The market's down. No worries.

                      Comment


                      • #12
                        Pundits' pronouncements about the US economy are optimistic. But follow the money, which tells a different tale: the concurrence of a tightened US bankruptcy law and debt relief measures to the Third World show that the US is headed for a period of paying down debt, while the rest of the world will get to spend for a change:

                        When money and mouth diverge

                        Comment


                        • #13
                          Since the first tax cut nearly 5 million jobs have been created and returns are pouring in to the government coffer like a mighty river. It is the spending of the government that needed some curbing.

                          The tax cut of Reagan led the the boom of the Clinton years. The tax cut of Bush Jr. is already being felt, but more benefits to follow.

                          9/11 affected about $ 1 trillion. Katrina about 3% of the nation's economy. But they were not strong enough to be felt in California where I live.

                          GM is bleeding domestically, but beginning to soar in China, a little proof that when other countries prosper, American products will find markets to sell.
                          THERE IS NO SALVATION IN RELIGION.

                          "Unless you are 'born' again, you can never get into the kingdom of God" (John 3:3).

                          Comment


                          • #14
                            Originally posted by Theja
                            Since the first tax cut nearly 5 million jobs have been created and returns are pouring in to the government coffer like a mighty river. It is the spending of the government that needed some curbing.

                            The tax cut of Reagan led the the boom of the Clinton years. The tax cut of Bush Jr. is already being felt, but more benefits to follow.

                            9/11 affected about $ 1 trillion. Katrina about 3% of the nation's economy. But they were not strong enough to be felt in California where I live.

                            GM is bleeding domestically, but beginning to soar in China, a little proof that when other countries prosper, American products will find markets to sell.
                            Incidents such as 9/11 and Katrina are faced by many nations.
                            They cannot have enduring effects on the economy.

                            The long term trend of the economy depends on
                            Govt. policies,productivity,efficiency,entreprenauership,markets,technology..
                            factors like that.

                            Comment


                            • #15
                              Weakness in the US dollar has continued to overshadow global stock markets as investors offloaded exporters on fears that corporate earnings will decline. Commodity markets have also slumped, with traders beginning to ask if recent record prices were justified.

                              London's main FTSE 100 index shed 1.2% to 5,841, led by the mining firms that have been the year's best performers. Germany's Dax ended down 1%, France's Cac slid 1.7%, Tokyo's Nikkei 225 fell 0.7%, and India's Sensex slumped 3.8%. In New York the Dow Jones was down for most of the day before finally ending up 0.42%. The Nasdaq lost 0.23% to close at 2,239.

                              One stockbroker in Germany explained that: "Investors are extremely nervous and the sell-off is hectic as people are trying to minimise their losses."

                              Banking giant HBOS added that: "Risky assets are under significant pressure across the board."

                              A report in Monday's Wall Street Journal claimed that President George W Bush's administration is "quietly acquiescing" to a dollar drop because it wants a weaker currency to boost foreign sales of US-made goods.

                              Analysts said that US policymakers are signalling they are happy for the dollar to decline by not aggressively talking up the currency.

                              A falling dollar would benefit the US economy by making US exports cheaper, and could help reverse the $700bn (£372bn) trade deficit with the rest of the world.

                              A lack of supply and strong demand has pumped up commodity prices. However, the dollar's fall could also increase the cost of US imports, thus fanning inflation and forcing the Federal Reserve, the US central bank, to continue to increase interest rates.

                              While that may be good news for the US trade deficit and domestic firms, it is likely to crimp sales growth at large foreign exporters such as electronics firms Sony and Canon, and carmaker Volkswagen.

                              During Asian trading on Monday, the dollar fell to an eight-month low of 109.66 yen. However, it recovered when European trading started and was recently at 110.35. The dollar also perked up against the euro and recovered to $1.2787 against the single European currency. It had earlier touched one-year lows. The greenback also recovered against pound sterling, with one pound worth $1.8845, compared with $1.8895 earlier.

                              At the same time, China's currency settled below the key 8-yuan level against the dollar for the first time since it was revalued last year. By setting the yuan's level at 7.9982 versus the US dollar on Monday, China signalled that it was willing to allow its currency to appreciate further against the US dollar, analysts said. The strength of the dollar against the yuan has been a key issue facing the White House, especially as Chinese exports to the US have surged.

                              Earlier this month, the US Treasury criticised China for making "too little progress" in reforming its exchange rate, but stopped short of accusing Beijing of manipulating its currency. That would have paved the way for sanctions.

                              America's deficit with China grew to $15.6bn in March.

                              Weak US dollar weighs on markets

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