Dollar Slide Accelerates; Risks of Rout Increase

[JeebusH]

NEW YORK -- The relentless dollar selling showed no sign of letting up in New York Tuesday, with the dollar sinking to new lows across the board.


In morning trading, the euro was at $1.2794, up from $1.2664 late Monday in New York. The dollar was at 106.17 yen, up a little from 106.07 yen late Monday, only thanks to aggressive dollar bids from Japanese banks on behalf of Japanese monetary authorities, dealers said.


Against the Swiss franc, the dollar was at 1.2256, down from 1.2337, while sterling was trading up at $1.8260 from $1.8060.


If anything, the dollar's slide was accelerating along with the increase in trading volume as investors return to the market after the holiday period. With very little to convince them otherwise, certainly not official rhetoric from U.S. or euro-zone policymakers, they're simply putting on fresh short dollar positions, en masse.

....

The dollar's malaise is widespread, with only official buying -- mainly from Japanese monetary authorities -- and a sprinkling of corporate demand appearing to stand in the way of the current run on the dollar turning into a rout.

....

http://story.news.yahoo.com/news?tmpl=story&u=/dowjones/20040106/bs_dowjones/200401060922000754

[tom_paine]

1. Yeah, killing our democracy sure helped the economy!

The benefits of Empire are innumerable indeed.

Now, we get a Third World Economy to match our Third World Government and our Third World Media.

[frogfromthenorth2]

3. Well, your friend from the North won't complain about that slump...

US currency was getting to pricey for my taste....

[hatrack]

2. And what's gold at these days?

$420? $421?

This would be great news for US exporters, if only we still made anything that people elsewhere in the world wanted to buy.

[htuttle]

4. About those exports...

November U.S. factory orders fall 1.4% & Dec. ISM nonmanufacturing Falls

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=102&topic_id=300500

Whatever it is that we ARE exporting, it isn't selling very well.

[Gin]

5. does this mean they were betting on the dollar to fall?

[Garion_55]

6. could someone tell a novice (me) what this could lead to?

what is bad about a falling dollar? what are the risks if it falls too far? how do you stop a dollar from falling?

I'm getting the feeling that if this countinues, something pretty bad is going to happen to us economically, just not sure what.

any info would be greatly appreciated.

[Emillereid]

7. Yeah -- what I want to know is if any of this economic news

affects me down here on main street. I read all sorts of alarmist sounding economic news, but I have to admit it rarely hits me where I live.

[madrchsod]

8. interest will have to rise

to support our debt..opps,we need to attract furners to buy our debt so up goes interest to attract investment in us bonds..

[htuttle]

9. Among other things...

The price of oil in dollars will go up. OPEC has to keep raising it just to stay even if the dollar keeps falling. This will make anything that needs to be transported more expensive.

Anything made overseas, and anything made from things made overseas (which is nearly everything) will get more expensive in dollars.

Food will go up, due to oil prices going up. Nearly all modern fertilizers and pesticides are made from petroleum products.

What can be done about it? In the long run, reducing our deficit and ultimately our national debt would be a good start. Dollars are really just 'IOUs', and nothing really backs them right now but a bunch of debt. We're currently moving in the exact opposite direction, however.

[sendero]

10. to expand...

... on what you have said, I'd add that there is one thing this economy CANNOT afford right now - a spike in interest rates.

The "recovery" that we have is completely contingent on the Federal Reserve pushing money into the system by keeping rates lower than they have been in 40 years or so.

A couple points rise in consumer and mortgage rates could easily kick us back into a "recession" that even all the govt number fudging cannot hide.

[nadinbrzezinski]

11. At the table what this means is

that yuo will pay more for food, fuel, and of course interest rates

Taht has been covered already

What it meaans for the nation... more and more are betting on the Euro, not the USD.. and the USD is quickly becoming another currency as nations switch reserves to Euros

Yep our economy, best case, will go into a recession, but the D word is not that far off either.

For those of you who have no idea, look at Argentina, that is the model, and yes they wanted this, but by '06, the crisis is here... this could POTENCIALLY crash wall street.

[Mithras61]

12. If you look more closely at the "betting on Euros" that's going on

what you are talking about is nations switching their currency reserves from USD to Euros.

(I'm no economist, but this is should give the right general idea)

While this doesn't sound so bad on the surface, if that starts happening, OPEC will likely start trading petroleum in Euros instead of USD. When this starts happening on a big basis, the USDs start coming home, and we don't have anything to back them with (all of which may have been part of the whole deal with Iraq, BTW, because Iraq WAS trading in Euros). Think of USDs in the foreign markets as checks.

As long as everyone is happy holding our check, everything is cool and we can keep writing more of them. When people start asking for payment which we don't have, then things start getting nasty. You then have to use "more" of our checks to get the same amount of local currency (USD drops compared to other currencies). That begins to make our checks less attractive, and MORE of them start coming home, and the whole thing accelerates.

This is what we call devaluation. When this happens, a country is forced to either abandon it's currency and come up with something new, or to restate the value of it's currency to try and recover (e.g. - give me 10 of your "old" USDs, and I'll give you 1 of my "new" USDs type of thing).

Combine this story with the tampering with the Major Economic Indicator numbers, and you have a bad situation. Add in the fact that the USD is already sliding against other major currencies (pretty much everything but the Japanese Yen, but that's being propped up by the Japanese govt to protect their currency reserves), and you have a situation which could end up in massive economic chaos (think Germany between WWI & WWII, and Argentina just a short while back, and you get the general idea, except this could easily cascade into a worldwide economic collapse like the Great Depression).

[htuttle]

13. You know, it just hit me

I bet THAT is who is buying all the gold, whether the equities markets go up or down. It's probably Asian countries converting their dollar reserves to gold.

Let me see...if gold is denominated in dollars, and the dollar is dropping while gold is going up, then to an another currency (like the euro), the dollar dropping mitigates the rise of gold somewhat (relative to the other currency -- the same goes for oil, I believe).

Unless you are already sitting on a few tens of billions of dollars, I suppose. Then you're still screwed as long as you are still holding dollars, and not gold.

[louis-t]

15. let's watch as all of bush's buddies

convert their billions to gold.

[louis-t]

14. kids, thank the pResident...

THANKS, GEORGE!

[TrogL]

16. Canadian Union officials are complaining

about the loonie going up because of high interest rates.

Interest rates have nothing to do with it - the greenback is doing its lead balloon imitation.

[TeeYiYi]

17. I'm no 'eggsbert' but . . .

. . . this sure feels to me like 'someone' is manipulating the value of the dollar and treating it like just another commodity to be traded. Buy and sell, buy and sell . . .

Hmmmmm. Who could that be? Hmm. Who, who, who . . . ?

Could it be . . . S_A_T_A_N ...?

TYY