[PAA-Discuss] Dollar Falls Against Euro on Speculation Fed Will Cut Rates

[Ron and Kris Graham]

As most people know who have been paying attention, the U.S. economy is the
huge turd sinking to the bottom of the toilet bowl. Former Fed chairman,
Alan Greenspan, says the United States is on the "edge" of a recession. I
say we are full blown in the middle of one now. Current Fed chairman, Ben
Bernanke, is talking another rate cut. These rate cuts are merely Curads on
a hemorrhaging arterial wound. This economy is going to bleed out. The
wealthy, as usual, will not be affected, but the rest of us poor slobs will
see the price of everything go up and our wages either remain stagnant or go
down. You can thank our corrupt U.S. government and their idiotic mantra of
letting the market regulate itself for this fiasco. Also, Alan Greenspan
should be taken out and horse whipped to within an inch of his miserable
life for seeing this shit on the horizon and doing nothing about it.

 

Kris

 

 

Dollar Falls Against Euro on Speculation Fed Will Cut Rates

By Lukanyo Mnyanda

Feb. 15 (Bloomberg) -- The dollar fell against the euro, headed for its
biggest weekly loss this year, on speculation the slowdown in the U.S.
economy will prompt the Federal Reserve to keep cutting interest rates. 

The U.S. currency traded near a one-week low against the euro before a
report economists say will show consumer confidence dropped last month. The
dollar declined after Fed Chairman Ben S. Bernanke yesterday signaled the
central bank may lower interest rates again to avert a recession. The yen
weakened after stocks in Asia rallied, boosting demand for higher-yielding
assets purchased with loans made in Japan. 

``The market has taken on board Bernanke's bleak assessment of the U.S.
economy,'' said Jeremy Stretch, senior market strategist in London at
Rabobank Groep, the third-biggest Dutch bank. Traders ``have scaled up
expectations of rate cuts'' and the currency may fall to $1.48 to the euro
today. 

The U.S. currency fell for a second day and traded at $1.4685 per euro by
7:18 a.m. in New York, from $1.4643 yesterday. It has lost 1.3 percent this
week, the most since the period ended Dec. 28. The dollar was at 107.71 yen,
from 107.87. The U.S. dollar index traded on ICE futures in New York, which
tracks the currency against six major counterparts, fell to 75.99, the
lowest since Feb. 5. 

The yen earlier fell against 13 of the most-active currencies, dropping the
most against the South African rand and Australian dollar, favorites of the
carry trade. It traded at 158.15 versus the euro, from 157.95. 

Rand Strengthens 

The dollar also fell the most against the South African rand and headed for
its first weekly loss this year against the currency of Africa's largest
economy. The rand benefits from its interest rate of 11 percent and from
rising gold and platinum prices. The dollar dropped to 7.65 versus the rand,
from 7.70 yesterday and was down 0.6 percent at 90.73 U.S. cents per
Australian dollar. 

The U.S. currency declined after Bernanke said yesterday the Fed ``will act
in a timely manner as needed to support growth.'' The world's largest
economy is ``clearly on the edge'' of a recession, former Fed Chairman Alan
Greenspan said in Houston yesterday. The economy is at ``stall speed'' and
the odds of a contraction are ``50 percent or better,'' he said. 

The Reuters/University of Michigan index of consumer sentiment probably
dropped to 76, from January's 78.4 reading, according to economists polled
by Bloomberg. Another report today may show international buying of U.S.
financial assets slowed in December, according to a Treasury survey. 

Rate Bets 

Futures on the Chicago Board of Trade show 36 percent odds the central bank
will lower its target for overnight lending between banks by 0.75 percentage
point to 2.25 percent by March 18, compared with a 30 percent chance
yesterday. The remaining odds are for a 0.5 percentage point reduction. 

The yen fell after the Bank of Japan voted unanimously today to keep
interest rates unchanged at 0.5 percent, as expected by all 42 economists in
a Bloomberg News survey. Governor Toshihiko Fukui told reporters after the
decision that inflationary risks are low and the global economic outlook is
becoming more uncertain. 

``We're seeing large swings in global stock and currency markets because of
a high aversion to risk,'' Fukui said. 

The Japanese currency also declined as stock markets in Asia advanced,
boosting demand for higher yielding assets. The Morgan Stanley MSCI Asia
Pacific Index rose 0.4 percent today, pushing its gain the last two days to
4.3 percent. 

``Things are calming down and people are moving money to higher yielding
assets,'' said Michelle Joubert, a trader in London at Currencies Direct
Ltd., which manages foreign-exchange transactions for corporate clients and
wealthy individuals. ``The carry trade is weighing on the yen'' and the
Japanese currency may trade as low as 115 to the dollar in the next three
months. 

In carry trades, investors buy higher-yielding assets with money borrowed in
countries with low interest rates. The strategy is considered risky because
currency fluctuations can erase the profit between borrowing and lending
rates. Australia's benchmark rate is 7 percent. 

To contact the reporter on this story: Lukanyo Mnyanda in London at
lmnyanda at bloomberg.net 

 

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