Monday, January 21, 2008

Has the Dollar Bottomed Out?



From the International Herald Tribune: "Has the dollar bottomed out?"

"Foreigners are buying American assets at cut-rate prices. To make their purchases, foreigners need dollars; more demand for dollars pushes the exchange rate higher. And, according to some important measures of the dollar’s value, the greenback may have hit bottom over two months ago."

More evidence: The USD is now selling at a one-year forward premium against almost two dozen currencies, see chart above, including almost a 2% forward premium vs. the British Pound, and almost a 1% premium vs. the Euro.

3 Comments:

At 1/22/2008 12:09 AM, Blogger vulcanhammer said...

What happens when the Federal reserve lowers the Fed fund rate next time out?

 
At 1/22/2008 5:28 AM, Anonymous Anonymous said...

Has the dollar bottomed out or are other currencies falling?

And what the heck is going on with the stock markets yesterday and today? Asian stock markets are getting battered up pretty badly.

Are we going to see the same running for the door panic selling here today?

 
At 1/22/2008 10:48 AM, Anonymous Machiavelli999 said...

I think the dollar has bottomed out. First thing to remember anonymous is that in the currency market some currency is always rising and some is always falling. Not all currencies can rise in value.

Even if the Fed does cut rates, I still think the dollar won't go down because the European Central Bank and the UK will also have to cut rates to stave off recession.

In the long run, I feel that this oncoming recession will fix a lot of the imbalances that have built themselves up in the US and the world. I believe the trade defecit will drop markedly after the recession is over. Exports will be helped by a lower dollar. We are already seeing this.

I believe fiscal discipline will be back in vogue after this recession and earmarks and pork will be seen for what it is, wastefull spending. People will see that defecits do matter!

Finally, I still remember the days when banks were criticized for being too stringent in their lending practices and accused of racism towards minorities. I hope noone ever makes that argument again.

 

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