what's the matter with the USD???

I am astonished......

Every time I check my trading platform, I find the US dollar off by at least a 100 points??? What's going on and why is this USD collapse??? I am really worried, but it seems that Warren Buffet was originally correct on his USD view more than a year ago, his timing was just not correct....

Is this the end of the USD era and the start of the Euro era or what???


Thanks,

Nader

Its the start of the long awaited correction in global trade imbalances.

Main things affecting the move:
The Fed signaled an end (or at least a pause) to interest rate increases.
The G-7 has called for asian countries to correct their exchange rates relative to the dollar.
China is about to to be labeled a currency manipulator by US Treasury.
China just (symbolically) raised interest rates.
The Iranian conflict is escalating.
Foreign Central banks have signaled a diversification strategy away from the dollar.
Japanese central bank is sopping up excess liquidity in anticipation of a rate hike.

ECB, is the main beneficiary because:
A) they are raising rates
B) they benefit the most from currency diversification

Interest rates, my friend, it's all about interest rates cycles. USD has, apparently, reached the end of the rates hikes. Just like we saw a long dollar rally during 2005 when the Fed went through their non-stop rate-climbing proccess, now it seems we've hit the end of an era and market is about to switch gears again.

Fed chairman Bernanke's testimony suggested that interest rates will peak at 5% for now is still seen undermining sentiment in the Dollar. Analysts suggested that even strong US data later in the day will be unlikely to turn sentiment around.

Bernanke helped to lower expectations on US interest rates by telling Congressmen that " at some point in the future the committee may decide to take no action at one or more meeting". This helped to depress the dollar toward the end of week in which the US currency had already shown an inability to benefit from positive US economic data.

High oil price (for several reasons, not just Iran) is also a big issue.

High commodity prices,

since US is an importer... any increase in raw material prices will decrease USD value.

In my opinion, (which doesn't mean much), the USD is falling apart. There are so many problems here. Raises, what's that? it costs about $40 to fill up the car with gas and my car only has a 12 gln tank. And with the way war is and who knows haw bad it is gonna get. The hurricanes that hit last year and the mess down south are not even close to being finished and hurricane season is right around the corner. 2 or 3 years ago a candy bar was only about 45 cents, now it is 75cents. everything costs so much more and the income is not getting better. There are so many factors to take into consideration when it comes to this. I feel there are problems that are worse than people think and the government does everything they need to to make us think differantly.




just my 2 cents

Stop moaning LOL! to fill a 12 gallon tank in the uk will cost $98.00!! think yourselves LUCKY!!

oofda!!! Ok, I guess it is gravy here. Wow I didn't realise it was that bad.

Are u serious?

Here it only costs 76,21 Dollars. (Germany) With gasoline we call 'normal' (not Diesel nor Super or Super plus).

And, i was quite sure, that nowhere in the world the politicians had pushed up
the prices as far as in germany.

Thanks god, that the oil price is goin' up now - makes me feel better, to know
i pay for the goods and not for the goverment, when i fill up my car. ;-)

ciao,
Tony

Yeah i'm serious.

12 Uk gallons = 54.36 litres

approx 97p/100p per litre = £52.73 x exchange rate ( 1.82 ) = $96/98 to fill a 12 gallon tank.

on a fundamental level, interest rates are what moves a currency. the only reason the market reacts to other data is because the data somehow effects interest rates. jobs and inflation is what drives interest rates, thats why you see such a big reaction from non-farm payrolls and CPI.

anyway, with this understanding, it is easy to see what is happening to the EURUSD. there is an expectation that the ECB will raise rates and that the Fed will stop raising rates. so naturally the EURUSD will go up. thats the same reason why i think a short USDJPY position is so good now.

getting back to warren buffet that you brought up, narafa. remember when the EURUSD was at 1.3600? the US interest rate was at 1%. then it slowly went to 4%, and with it the EURUSD went to 1.1800. now the Fed is expected to holt interest rates and ECB to raise, and look whats happening. i dont think ole warren's timing was off, his trade what just dead wrong. he went short the dollar just as the fed was starting to hike rates, wrong move!!! i am not ready to take a long EURUSD position just yet, i want to wait to see what the ECB says this week. we have an interest rate statement coming up from them and Trichet has a couple speeches planned. if they signal a rate hike, and Bernanke continues to signal a pause, i think the EURUSD will be a buy on a pullback.

oh, and btw, a weak dollar is good for the US, especially in the face of our trade deficits. a weak dollar in no way signals a weak US economy, the two are not really related in that way. to see the strength of the economy you need to look more at the domestic stock and bond markets, and in this case they are doing fairly well!

sounds so simple, but its so true...

Any web links that can let me understand better of currency fundamentals ?

Interest rates, and fundamentals that might push the Central Banks to alter their rates-policy. All the other fundamentals are just intraday noise.

Merlin's right that it is better for the U.S. as a whole; the current administration has stated that a strong dollar is good for the economy.
When it comes to politics, a weak U.S. dollar could be percieved as a weak economy....hence, a weak country; which happens to be in the middle of a war against terrorism. Granted that merlin is 100% correct that it doesn't truely indicate a weak economy, politicians will adhere to "perception is reality".

So, to everyone who says that the economy is falling apart, the dollar will loss ground, etc., etc.; don't be too sure and bet the farm on that. Keep in mind that the government also has a strong influence on the forex market and I would expect the dollar to suffer slightly before it bounces back.

Seeing the "big picture" means seeing every aspect of the global market....even if it pertains to war.

This means that I must pary to GOD and thank my government...To fill a 12 gallon tank here in Egypt (Assuming that 1 gallon is 3 litres), it will cost me 36 Egyptian Pounds, which translates into $6.2...Wow, what a difference...Even if I used the best octane available, it will still cost around $11...


Thanks,

Nader

I will throw in my twelve gallons here

In SLC,Ut, USA it just cost $32.40 with taxes and all for a 12 gallon tank of gas 87 octane.

If you were to adjust that to real dollars from the gas crunch of the 70s it is not nearly as high... I heard on the news radio from an oil spokesman that we really don't see here in the USA any kind of demand rejection until price reaches somewhere around $92.00 per barrel for oil. If that is true and not just oil industry hype, we have a way to go before it seriously hurts the economy or before people change their energy usage patterns.

Ah, here we go!

A gallon is accordin' to google 3,78 l, that means 12 gallons are 45,42 l. A litre
costs 97p, so the whole tank cost 44 British Pounds - that's äquivalent to
80 US Dollars.

That's just a little more than we pay here in germany. - Still i wonder what sort
of fuel that is, you're referin' to

ciao,
Tony