Wally
May 12th, 2006, 4:28:16 PM
http://news.yahoo.com/s/ft/20060512/bs_ft/fto051220061314267912
http://us.news3.yimg.com/us.i2.yimg.com/p/ap/20060512/capt.318f0ecd36e34ac6aea2228e06084053.foreign_exch ange_gfx848.jpg?x=380&y=341&sig=GBUt7L4y70a5qeZN98yU8g--
Another week, another set of losses for the dramatically diminishing dollar, which on Friday slumped to its lowest level since October 1997 in trade-weighted terms.
The continuing sell-off came amid a series of events that should, in theory, have aided the greenback. The
Federal Reserve released a broadly hawkish monetary policy statement, Thursday's US trade data was far better than feared, and the US Treasury declined to formally cite China for currency manipulation, a ruling that would have been expected to drive further Asian gains against the dollar.
Yet sentiment has turned so decisively against the greenback that it still fell, sliding a further 1.1 per cent to $1.2879 to the euro, 2.1 per cent to $1.8897 against sterling and 1.9 per cent to SFr1.2022 against the Swiss franc, hitting new one-year lows against each, and 1.3 per cent to Y110.50 against the yen. The dollar has now lost 6-8 per cent against each of these currencies since the start of April.
The selling has been driven by two major factors. First, relative interest rate differentials continue to move against the dollar.
Despite the Fed statement, the market is only pricing in a 40 per cent chance of a June rate rise. In contrast there is increasing talk that the European Central Bank may sanction a larger-than-expected half-point rate rise next month, that Japan could initiate its first hike of the cycle as early as next month, and that the Bank of England may raise rates before the year is out.
what does this mean for the US? This can't be good for inflation. We are in some economic trouble.
http://us.news3.yimg.com/us.i2.yimg.com/p/ap/20060512/capt.318f0ecd36e34ac6aea2228e06084053.foreign_exch ange_gfx848.jpg?x=380&y=341&sig=GBUt7L4y70a5qeZN98yU8g--
Another week, another set of losses for the dramatically diminishing dollar, which on Friday slumped to its lowest level since October 1997 in trade-weighted terms.
The continuing sell-off came amid a series of events that should, in theory, have aided the greenback. The
Federal Reserve released a broadly hawkish monetary policy statement, Thursday's US trade data was far better than feared, and the US Treasury declined to formally cite China for currency manipulation, a ruling that would have been expected to drive further Asian gains against the dollar.
Yet sentiment has turned so decisively against the greenback that it still fell, sliding a further 1.1 per cent to $1.2879 to the euro, 2.1 per cent to $1.8897 against sterling and 1.9 per cent to SFr1.2022 against the Swiss franc, hitting new one-year lows against each, and 1.3 per cent to Y110.50 against the yen. The dollar has now lost 6-8 per cent against each of these currencies since the start of April.
The selling has been driven by two major factors. First, relative interest rate differentials continue to move against the dollar.
Despite the Fed statement, the market is only pricing in a 40 per cent chance of a June rate rise. In contrast there is increasing talk that the European Central Bank may sanction a larger-than-expected half-point rate rise next month, that Japan could initiate its first hike of the cycle as early as next month, and that the Bank of England may raise rates before the year is out.
what does this mean for the US? This can't be good for inflation. We are in some economic trouble.