Any speculation on the US$?

Hobbes

1.30 now Will it get higher or lower?

dahamsta

HIGHER, HIGHER!



sorry

Merrion

It will probably get higher in the short term but in the longer term China will loosen its currency trading system which should see the dollar pick up a bit.

Either way it'll be bad news for many in Ireland - a higher dollar increases oil costs (in Euro terms) so increases inflation; a lower dollar reduces Ireland's competitiveness in terms of inward investment.

jay567

Over the last few weeks, the yanks have more or less (not directly) shown that they have no interest in pulling the $ out of its downward spiral. All top people in gov when asked the question relating to the declining dollar danced around the question. This would imply that its going to get worse before better. One point to realise is the fact that at least its now being spoken about. Which may speed up recovery.
Yes the dollar low kinda suits us, however when they become more competitive than us due to this fact, then maybe something will happen.

Speaking as someone that invests in the US market, i have seen all profits fade recently, my stock goes up, but the dollar i paid with goes down.

Gandhi

Alan Greenspan recently issued a warning that something would have to be done about the dollar's decline, but many others are just plain in denial about it.
Bush himself recently made a rather patronising comment that basically said "we might do something small just to calm down those who are unnecessarily worried about the dollar's slide", or WTTE.
He made that comment just a day or so after Greenspan's warning, so it may have been directed at Greenspan.
Greenspan has recently attacked Bush's policy of letting the deficit balloon, which is not helped by the fact that most of it consists of foreign debt (much of it from Chinese and Japanese banks, I believe), which a weak dollar will exasperate.

Most of that stuff I heard in the New York Times, I think, but I am too lazy to track down references.

A lot of people over here just refuse to believe that the dollar is no longer the unstoppable king of currencies now that the Euro is around.

Nuttzz

It will climb to $1.33 in the next month then some serious profit taking will see it head back to $1.27 by the end of Jan where it will hold in the range of $1.265 - $1.280 for about 3 months.

Thats my guess anyway

Victor

Merrion wrote:

It will probably get higher in the short term but in the longer term China will loosen its currency trading system which should see the dollar pick up a bit.

But China (and Japan) are effectively supporting the dollar at the moment. Chinese and Japanese clients are buying dollar debt (part of it supporting the federal budget deficit). Separately the Yuan is pegged tot he dollar and artificially supporting the dollar. Depegging will cause the dollar to fall agaisnt the yuan and to a lesser degree agaisnt other currencies.

http://www.bloomberg.com/apps/news?pid=10000080&sid=ad.DKoFwEOPI&refer=asia

Captain Trips

Victor wrote:

But China (and Japan) are effectively supporting the dollar at the moment. Chinese and Japanese clients are buying dollar debt (part of it supporting the federal budget deficit). Separately the Yuan is pegged tot he dollar and artificially supporting the dollar. Depegging will cause the dollar to fall agaisnt the yuan and to a lesser degree agaisnt other currencies.

http://www.bloomberg.com/apps/news?pid=10000080&sid=ad.DKoFwEOPI&refer=asia

Yes this is correct IMHO, c/t the above post. If China disenages the Yuan and starts to invest more locally including Japan the dollar is absolutely bollocked. Japan has been buying US debt to keep itself afloat but even it's gone below 102 Yen today which is bloody low.

The reason Bush et al are not talking about or are "not concerned" about is because they don't want shmuck American to worry about it coming up to Christmas. In reality they have very very little control over the dollar, for example, the G20 meeting last week. the eurozone could intervene to help it but the massive debt the US has on top of thinsg means that the Americans have to pay for it all somehow - it will be in expensive imports.

Bear in mind the dollar has dropped 50% in around 3 years against the euro. I wouldn't be surprised at 1.40-1.50 in Feb-April; depends on what China does in the next 6 months.

WIth currencies (IANAEconomist BTW) it seems that as soon as people see a thing rolling it starts to landslide. The CHF is holding very strong against Euro, the dollar has gone to 1.88 against GBP and 1.14 to the CHF. Not so much a strengthening of the euro so as a weakening of the dollar over the whole board, and Greenspan can do feck all about it. They will have to raise interest rates DRAMATICALLY to counter the international dollar sentiment across the boards - the conspiracy theorist in me says that this was held off until after the election.

Predictions:
1. China will disengage the Yuan by mid-2005. This is a big no confidence in the dollar and China knows the effect it will have.
2. Fed will raise rates more than the 0.25% little skips - a big rise is needed to make the $ attractive
3. By mid-2005, dollar will be hovering 1.40-1.50 to euro
4. I will go to Vegas on holidays in mid-2005

the yanks have more or less (not directly) shown that they have no interest in pulling the $ out of its downward spiral. All top people in gov when asked the question relating to the declining dollar danced around the question.

There is absolutely virtually nothing they can do to influence the dollars slide. The US has massive debt and low "goodwill" for investment now. They need a miracle or it's going to be 10$ a litre petrol. I think it's portrayed as very negative for eurozone but does anyone know how much trade eurozone does with US?

I suspect that while it's being portrayed negatively, we are okay with the rest of the world, including vs. GBP (1.42 today?).

I suppose it means cheap oil.............

Our man in Havana

It was reported that the ECB will start selling euros and buying dollars to halt the rise of the euro. Is this wise?

Victor

Bond-007 wrote:

It was reported that the ECB will start selling euros and buying dollars to halt the rise of the euro. Is this wise?

Stability is wise. Instability is not.

Currency movements are a double-edged sword, making imports cheaper, but exports more expensive and the other way around for someone else. It puts someone out of a job, while making someone else work overtime. Instability and the uncertainty is bad for investment, whcih makes it bad for everyone.

Euro rises above $1.32 for the first time - http://www.rte.ie/business/2004/1125/euro.html

Gold above $450 for first time in 16 years - http://www.rte.ie/business/2004/1125/gold.html

miseme

sorry to deviate a little off topic. but as you all seem to have pretty informed views.. and as things seem to be pretty predictable at the moment..

do any of you guys trade FX online? if not.. why not?

Victor

The little word "if". If this happens, that might result. If that happens, this might result.

Blackjack

spoke to 2 FX traders about this during the week. Both had differing views, one thought that the Dollar was oversold and that there was a big rebound due, he did however say that as long as T-Bills were being bought, that would support the Dollar. Signs are though that demand for T-bills is waning (due to the huge defecit) and that if they lose popularity, then the Dollar is in Serious trouble.
Significantly, Russia has reorganised it's foreign currency reserves from largely Dollar to about 25% Euro - makes good sense when the EU is it's largest trading Partner.

The other though that things could get worse for the Dollar, mentioning that the market does not appear to be paying any attention to the economic indicators, but this appears to be due to a lack of confidence in the current US Admininstration to deal or pay any attention to with the huge deficit.
The US is currently trying to put the pressure on China to devalue it's currency, but the Chinese have stated that they don't have the Infrastructure to do this.

Dollar hit 1.33 against the Euro at one stage today- a new record low.

Apparently there are some doom-mongers (whether justified or not) are predicting some serious trouble ahead, which does not bode well for the world economy in General.

OfflerCrocGod

Captain Trips is on the ball the $ will hit 1.40-1.50 early next year, at which stage the Chinese will kick the USA in the nutz using the heavy boot of the yuan.

Victor

Blackjack wrote:

The US is currently trying to put the pressure on China to devalue it's currency, but the Chinese have stated that they don't have the Infrastructure to do this.

Not "devalue" - float. The yuan is currently tied to the dollar to give Chinese exporters stability in their American markets. Floating the yuan will devalue the dollar not the yuan, making Chinese exporters less competitive and American manufacturers more competitive (relatively).

Captain Trips

Victor wrote:

Not "devalue" - float. The yuan is currently tied to the dollar to give Chinese exporters stability in their American markets. Floating the yuan will devalue the dollar not the yuan, making Chinese exporters less competitive and American manufacturers more competitive (relatively).

It's a really bizarre state of affairs IMHO - economically all the US has to theroetically do is to make homegrown manufacturing a positive and to rely less on imports which is becoming more expensive across the board for americans.

But currently they are wretched with imports, and a vast portion of "American" companies aren't even based in the US anymore. Included in this is things like GM - they make more money on insurance and finance then selling cars. Maybe focussing on that and becoming a more worldwide exporter of vehicles might work.

This CNN bit is interesting: http://www.cnn.com/2004/US/11/26/wto.sanctions.ap/index.html It's not the $2bn the EU wanted but it shows that the US certainly does not have/deserve the all-conquering image it has.

A big drop in the $ (and it's not just on manufacturing - the petrodollar stuff is possibly much worse, plus the almighy credit they have received from the rest of the world!) could hurt us all. I really see a 29-style crash looming but the worst hit will be of course Americans who will find mortgage payments skyrocketing as Fed rates go up.

Blackjack's comment is interesting as it may be on an inevitable slide but now it's so cheap maybe people will start buying to have a bit of a rebound but ultimately I think the snowball is rolling.

Victor

Captain Trips wrote:

This CNN bit is interesting: http://www.cnn.com/2004/US/11/26/wto.sanctions.ap/index.html It's not the $2bn the EU wanted but it shows that the US certainly does not have/deserve the all-conquering image it has.

I think it's two different arguments.

uberwolf

there was a good article/comment in this weeks guardian weekly about the likely chinese influence on the issue. The US are trying to teach Europe a lesson but get into bed wth China and the goals may not be compatible due largely to Frances pleasant history with China through the UN.

I'll go see if I can find it.