Skip to comments.Rate speculation sends dollar to record low
Posted on 11/20/2007 4:40:40 AM PST by DeaconBenjamin
The dollar fell to a record low against the euro on Tuesday as rumours swept the currencies markets that the Federal Reserve was set to deliver an emergency cut in US interest rates.
Traders said the talk was that that the Fed would cut interest rates when it released its new growth forecasts and the minutes from its October meeting at 19.00GMT.
The dollar fell 0.9 per cent to an all-time low of $1.4797 against the euro, dropped 0.7 per cent to $2.0640 against the pound and lost 0.8 per cent to SFr1.1070 against the Swiss franc.
Neil Mellor at Bank of New York Mellon dismissed the speculation, however.
The Fed will want to keep its options open, he sad. By introducing an emergency rate cut, it would send the wrong message out to the market and seriously undermine its credibility.
Indeed, David Woo at Barclays Capital said the likelihood was that Feds economic projections would be more upbeat than expected.
With the market relatively confident about the prospects for a rate cut in December, the risk is these expectations will be disappointed somewhat, which would be positive for the dollar, he said.
Meanwhile, stability on Asian equity markets put pressure on the yen as a pick-up in risk appetite saw the yen give back Mondays gains.
Analysts said heightened risk appetite had prompted renewed demand for carry trades, in which the low-yielding yen is sold to finance the purchase of higher-yielding, riskier assets elsewhere.
The yen fell 0.3 per cent to Y110.10 against the dollar, lost 1.1 per cent to Y162.88 against the euro and dropped 1.1 per cent to Y227.29 against the pound.
However, Derek Halpenny at Bank of Tokyo-Mitsubishi said yen sell-offs were becoming less convincing by the day and he doubted the return of risk appetite would be prolonged.
He said the key signal of impending trouble for the financial markets in August was the sudden loss of liquidity in the money markets that triggered a spike in short-term money market rates.
The very same development is now taking place again, he said. With financial markets in stress again, the scope for yen weakness looks limited.
WOW!!! This blindsided me!! LOL!
America is now a bargain with the wise jumping in. Meanwhile, overseas they are sweating bullets for the USD got rebates and incentives, hehehe.
If we didn’t have a president who loves the weak dollar and high oil prices, there would have been coordinated intervention by now.
Bull. The Fed needs to do a big rate cut now just to keep up with reality.
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We need a rate increase to shore up the dollar and to reduce inflation.
Oh yeah, it’s just GREAT when your national currency collapses!
We’ll follow the same road to wealth traveled by other great nations: Mexico, Argentina, Bolivia, etc.
They drop the rates to protect our national economy, they kill the dollar, which is already losing its status as the world's reserve currency, with all of the tremendous advantages that has given us since Bretton Woods in 44.
Or they raise interest rates to protect the dollar and maintain its world leading status (good luck!) and choke the national economy.
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
~~Ludwig von Mises
Hint ol' boys. You have no credibility. The credit bubble is bursting and the dollar is tanking and it happened on your watch.
Who are you speaking of? The EURO and Yuan are about to blow up in their faces. Cable, also.
Their central bankers need to slash their rates before they go busted.
See my last. The Fed is damned if they do or don’t. We’re cornered, the result of our credit bubble excesses. It’s too late to be saved by Bernanke pulling a Volcker. Won’t/can’t work this time.
hey, guys, let’s continue this over here. Let us see if you can stay on this topic this time - the role of the federal reserve in undermining the US$ through its excessive expansion of the credit bubble encouraged by pumping funds into the economy through those “evil” primary dealers.
I agree, we’re just leading the pack in the downward race of debasing our national currencies. But there will be severe punishment to the USA for “winning” this race to the bottom, especially regarding the loss of dollar denomination of oil contracts. Once countries don’t need dollars to purchase oil, there will be no remaining floor under the dollar, and “watch out below!”
Isn’t Greenspan to blame for a lot of this mess with LOW INTEREST rates??
Like hardworking Americans for instance?
Huh? How will it help us if the gulf states and the Saudis unpeg from the dollar and sell oil in Euros?
When WAS the last outside audit of the gold allegedly in Fort Knox?
Or is there just a pile of paper there, “lease” agreements for gold that’s long since gone, never to return?
and the smart money is jumping in so fast that stocks, assets and the dollar are screaming back up as folks can't get in fast enough through a narrow window of opportunity [/sarcasm].
Do you have any clue exactly how much worthless US$ denominated paper is cramming the vaults of the rest of the world? It was our #1 export.
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