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Joined Aug 2007
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Status: The PipsMaker
|290 Posts
Nov. 7 (Bloomberg) -- The dollar fell the most since September against the currencies of its six biggest trading partners after Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves.
The dollar fell against all 16 of the most-active currencies, declining to the weakest versus the Canadian dollar since the end of a fixed exchange rate in 1950, a 26-year low against the pound and a 23-year low versus the Australian dollar. The New York Board of Trade's dollar index dropped to 75.21 today, the lowest since the gauge started in Mar 1973.
``Further weakening of the dollar is very likely,'' said Teis Knuthsen, the Copenhagen-based head of foreign-exchange, fixed-income and derivative research at Danske Bank A/S, the Nordic region's second-biggest lender. China may ``diversify out of dollar holdings.''
The U.S. currency slumped to $1.4704 per euro, the lowest since the 13-nation currency debuted in January 1999, before trading at $1.4671 as of 7:15 a.m. in New York, from $1.4557 late yesterday. The dollar dropped the most in two months against the yen, trading as low as 112.87 yen. The euro fell against the yen to 165.84, from 166.99 yesterday.
The U.S. dollar index may be due for a reversal, according to a technical indicator. Its 14-day relative-strength measure fell to 21.38 today, below the 30 mark, which may signal the currency's decline has bottomed out.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
Chinese Comments
``We will favor stronger currencies over weaker ones, and will readjust accordingly,'' Cheng Siwei, vice chairman of China's National People's Congress, told a conference in Beijing. The dollar is ``losing its status as the world currency,'' Xu Jian, a central bank vice director, said at the same meeting.
The dollar also fell to an all-time low against the synthetic euro, a theoretical value that estimates where the currency would have traded before its inception. The prior record was $1.4557 set in 1992.
The U.S. currency may weaken to between $1.48 and $1.50 against the euro by year-end, Knuthsen said.
Chinese investors have reduced their holdings of U.S. Treasuries by 5 percent to $400 billion in the five months to August. China Investment Corp., which manages the nation's $200 billion sovereign wealth fund, said last month it may get more of the nation's reserves to invest to improve returns.
Treasuries Rise
U.S. 10-year Treasury notes rose today as mounting credit-market losses and declines in stocks pushed investors to the safety of government debt.
``The world's currency structure has changed,'' Xu said at the conference in Beijing. Cheng, speaking to reporters after his speech, said his comments don't mean China will buy more euros. The National People's Congress, China's legislature, isn't involved in setting currency policy.
``Cheng has a history of speaking out on a range of financial market and economic developments, and his comments are not always accurate,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong.
Cheng's remarks on Jan. 30 that China's stock rally was a ``bubble'' caused the benchmark index to fall the most in almost two years the following day. The Shanghai and Shenzhen 300 Index, then over 2,500 points, has since climbed above 5,300.
The euro's gains may be limited by speculation European economic growth may slow, reducing the need for higher interest rates.
ECB Rates
The European Central Bank will keep its key rate at 4 percent tomorrow, according to all 61 economists surveyed by Bloomberg News. Data yesterday showed manufacturing orders in Germany fell more than expected in September.
``The euro is clearly overvalued against the dollar,'' Emanuele Ravano, co-head of European strategy for Pacific Investment Management Co., which manages the world's biggest bond fund, said late yesterday in Brussels. The ECB ``over the course of 2008 will totally change its tune'' by cutting in the second half.
Europe's single currency will trade at $1.43 versus the dollar by year-end, according to the median forecast of 42 analysts and brokerages surveyed by Bloomberg News.
The dollar's decline helped drive the price of crude oil to a record $98 a barrel and gold to a 27-year high, encouraging investors to buy assets in commodity-producing nations.
Commodity Currencies
Commodity currencies led the gains today. The Canadian dollar advanced to $1.1040. The Australian dollar gained to 93.98 U.S. cents, the highest since April 1984, from 92.87 U.S. cents. The rand rose to as high as 6.4294 per dollar, the highest since May 2006. The pound rose to $2.1052, the highest since May 1981.
The dollar's 9.8 percent drop against the euro this year boosted the competitiveness of U.S. exports, helping shrink the nation's trade deficit to $57.6 billion in August, the smallest since January.
French President Nicolas Sarkozy yesterday raised concern about the euro's strength during a visit to the U.S., saying ``you don't need too weak a dollar'' to spur growth in the world's largest economy.
``This is an asset story and shows sentiment for the dollar continues to be quite negative,'' said David Forrester, currency economist at Barclays Capital in Singapore.
The Australian dollar gained after the country's central bank raised its benchmark borrowing cost to 6.75 percent today. Governor Glenn Stevens, announcing the quarter-point rate increase, said inflation will exceed the bank's target.
Pressure on Fed
The dollar fell against the Norwegian krone as traders added to bets Norway's central bank will increase its 5 percent deposit rate. It declined to 5.2835 kroner, from 5.3474. The dollar also dropped as losses from subprime-mortgage defaults added to pressure on the Federal Reserve to lower its target for the overnight lending rate between banks to 4.25 percent next month.
``The interest-rate outlook is dragging down the dollar against major currencies such as the euro and the Australian dollar,'' said Seiichiro Muta, director of foreign exchange in Tokyo at UBS AG, the world's second-largest currency trader. ``I cannot see the bottom of the dollar depreciation yet.''
Interest-rate futures traded on the Chicago Board of Trade show a 62 percent chance of a quarter-percentage point Fed rate cut on Dec. 11, compared with 6 percent a month ago. Citigroup Inc. may write down an additional $2.7 billion worth of subprime- related assets, CreditSights Inc. said yesterday.
New Zealand's dollar rose to 78.35 U.S. cents from 78 U.S. cents on speculation a report tomorrow will show the unemployment rate remained at a record low, boosting the chance of another increase to the country's record 8.25 percent benchmark interest rate.
To contact the reporters on this story: Agnes Lovasz in London at [email protected] ; Stanley White in Tokyo at [email protected] Last Updated: November 7, 2007 07:17 EST
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Joined Aug 2007
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Status: The PipsMaker
|290 Posts
Nov. 9 (Bloomberg) -- The dollar declined to a record low versus the euro, headed for a 5th wk of losses, on speculation slowing U.S. economic growth will prompt the Fed to reduce the benchmark interest rate next month.
The U.S. dollar fell against 12 of the world's 16 most- active currencies today as Fed Chairman Ben S. Bernanke acknowledged the expansion will cool and as U.S. investment banks reported credit-market losses.
Economists forecast a report today will show consumer sentiment was the weakest since May 2006 and traders have increased bets policy makers will cut borrowing costs for a third time this year on Dec. 11.
``On an interest-rate story it's hard to buy the dollar,'' said Chris Loong, head of currency and asset allocation in Sydney at State Street Global Advisors. ``The biggest growth downgrades are coming out of the U.S. $1.50 per euro is now on the radar.''
The dollar fell to $1.4738, the weakest since the European currency started trading in January 1999, before trading at $1.4714 as of 10:54 a.m. in Tokyo from $1.4676 in New York yesterday. The euro bought 165.48 yen from 165.29.
The currency dropped the most this week against the Swiss franc, Norway's krone and the Japanese yen. It fell 2.6 percent to 1.1256 versus Switzerland's currency and 2.5 percent to the krone. Against the yen, the dollar declined 1.8 percent to 112.83, after reaching 112.10 yen yesterday, the lowest since Aug. 17.
Bernanke on Growth
A 0.75 percentage-point reduction in U.S. interest rates over the past two months has helped weaken the dollar 10% against the euro and 7% versus the British pound this year.
The rate setting Federal Open Market Committee ``expected that the growth of economic activity would slow noticeably in the fourth quarter,'' Bernanke said yesterday in prepared remarks to lawmakers at a hearing of the congressional Joint Economic Committee. High commodity prices and a weaker dollar may stoke inflation ``for a time,'' he said.
The Reuters/University of Michigan preliminary consumer confidence index for November fell to 80, from 80.9 in October, according to a Bloomberg News survey of economists.
The U.S. currency touched the weakest since 1981 versus the pound and the cheapest since 1995 against the Swiss franc yesterday as the prospects of lower rates dimmed the allure of U.S. assets.
Spreads Widen
Interest-rate futures traded on the Chicago Board of Trade show 90 percent odds the U.S. central bank will cut rates by a quarter-percentage point to 4.25 percent on Dec. 11, compared with 68 percent a week ago.
The world's biggest banks have written down at least $40 billion in assets tied to U.S. subprime mortgages because of record foreclosures. Morgan Stanley, the second-biggest U.S. securities firm by market value after Goldman Sachs Group Inc., said yesterday it lost $3.7 billion in the two months through Oct. 31.
The yield advantage for holding two-year German notes over similar-maturity U.S. Treasuries widened to 0.39 percentage point, the most since April 2004.
The euro strengthened above $1.4531 this week, equivalent to the deutsche mark's record high of 1.3455 against the dollar in March 1995. The break cleared resistance for the euro and opened up further gains for the currency, said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey.
Carry Trades
The yen fell against the euro and the Canadian and New Zealand dollars on speculation gains in Asian stocks gave traders more confidence to invest in higher-yielding assets bought with money borrowed in Japan.
The Australian dollar and New Zealand dollars are favorites for so-called carry trades because of interest-rate premiums that are as much as 7.75 percentage points higher than Japan's 0.5 percent rate.
The Morgan Stanley Capital Asia-Pacific Index of regional shares rose 0.5 percent as U.S. stocks trimmed losses yesterday on a rebound in banking shares.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.
``Japan's rates are low, so there's no reason for money to stop flowing from Japan to other currencies,'' said Hiroshi Yoshida, foreign-exchange trader at Shinkin Central Bank in Tokyo. ``A rebound in stocks makes investors more comfortable to put on carry trades.''
To contact the reporter on this story: Stanley White in Tokyo at [email protected] ; David McIntyre in Sydney at [email protected] Last Updated: November 8, 2007 20:56 EST
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Joined Aug 2007
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Status: The PipsMaker
|290 Posts
Sh*t! As I left I missed all the action!
GJ fell from 236.04 - 232.85 (319 PIPS!!!)
GU fell from 2.1125 - 2.0962 (163 PIPS!!!)
Rumors: Edit - Bloomberg reporting that there was a temporary suspension of trading in Barclay's which caused the 100 pip GU drop.. that 10 billion amount was a write-down. I will do some snooping and update this.
I had some open trades left from yesterday/this morning so these are what I missed but hey, at least I made some pips.
Let's Pimp some Pips!
