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Rate speculation sends dollar to record low
Financial Times ^ | November 20 2007 11:04 | By Peter Garnham

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 Fed’s 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 Monday’s 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.”


TOPICS: Business/Economy; Foreign Affairs; Government
KEYWORDS: dollar
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Emergency rate cut? What emergency?
1 posted on 11/20/2007 4:40:41 AM PST by DeaconBenjamin
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To: 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.

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.

2 posted on 11/20/2007 4:56:52 AM PST by BlabItGrabIt (Trucks...Trucks....Trucks...Trucks)
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To: DeaconBenjamin

If we didn’t have a president who loves the weak dollar and high oil prices, there would have been coordinated intervention by now.


3 posted on 11/20/2007 5:39:15 AM PST by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: DeaconBenjamin
“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.”

Bull. The Fed needs to do a big rate cut now just to keep up with reality.

4 posted on 11/20/2007 5:40:54 AM PST by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: DeaconBenjamin; Calpernia; cbkaty; Nervous Tick; ex-Texan; RockinRight; NVDave; Neidermeyer; ...

Economy/Credit/Housing Issues Ping List

If you want on or off this list let me know.


5 posted on 11/20/2007 5:42:04 AM PST by Hydroshock ("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
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To: Moonman62

We need a rate increase to shore up the dollar and to reduce inflation.


6 posted on 11/20/2007 5:43:18 AM PST by Hydroshock ("The Constitution should be taken like mountain whiskey -- undiluted and untaxed." - Sam Ervin)
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To: BlabItGrabIt

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.


7 posted on 11/20/2007 5:58:21 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Moonman62
The Fed has no magic bullet, no solution.

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.

Hobbes choice.

"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

8 posted on 11/20/2007 6:01:49 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: DeaconBenjamin
Well, I guess we were not at a bottom on the dollar in the previous discussion. and seriously undermine its credibility.

Hint ol' boys. You have no credibility. The credit bubble is bursting and the dollar is tanking and it happened on your watch.

9 posted on 11/20/2007 6:01:57 AM PST by AndyJackson
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To: Travis McGee
Oh yeah, it’s just GREAT when your national currency collapses!

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.

10 posted on 11/20/2007 6:02:58 AM PST by BlabItGrabIt (Trucks...Trucks....Trucks...Trucks)
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To: Hydroshock

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.


11 posted on 11/20/2007 6:03:35 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Travis McGee
Maybe we can get rid of some of these leeches pegged to our currency if we continue to sour the milk.
12 posted on 11/20/2007 6:04:58 AM PST by Realism (Some believe that the facts-of-life are open to debate.....)
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To: Toddsterpatriot; groanup

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.


13 posted on 11/20/2007 6:05:00 AM PST by AndyJackson
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To: BlabItGrabIt

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!”


14 posted on 11/20/2007 6:05:51 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Travis McGee

Isn’t Greenspan to blame for a lot of this mess with LOW INTEREST rates??


15 posted on 11/20/2007 6:05:58 AM PST by Ann Archy (Abortion: The Human Sacrifice to the god of Convenience.)
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To: Realism
Maybe we can get rid of some of these leeches pegged to our currency

Like hardworking Americans for instance?

16 posted on 11/20/2007 6:06:02 AM PST by AndyJackson
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To: DeaconBenjamin
Well at least the dollar is backed up by all of the gold in Fort Knox.


What?

The dollar's not backed by gold?

And there's no gold in Fort Knox?



We're DOOMED!

17 posted on 11/20/2007 6:06:11 AM PST by CholeraJoe (Be unique. It makes it easier for the rest of us to identify the morons.)
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To: Realism

Huh? How will it help us if the gulf states and the Saudis unpeg from the dollar and sell oil in Euros?


18 posted on 11/20/2007 6:07:22 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: CholeraJoe

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?


19 posted on 11/20/2007 6:08:25 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: BlabItGrabIt
with the wise jumping in.

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.

20 posted on 11/20/2007 6:08:47 AM PST by AndyJackson
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To: CholeraJoe
And there's no gold in Fort Knox? We're DOOMED!

Today money is backed by cold hard electron bits. Just a series of Ones and Zeros.

And that's the way it is.

21 posted on 11/20/2007 6:10:41 AM PST by NeoCaveman ("Don't doubt me" - The Great El Rushbo)
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To: Travis McGee

There needs to be coordinated intervention to support the dollar while the Fed cuts rates. Why does no one complain about a weak dollar bubble? There are a lot of speculators who would be driven out of the market by intervention.


22 posted on 11/20/2007 6:10:53 AM PST by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Travis McGee

Why not leave it flat?


23 posted on 11/20/2007 6:12:07 AM PST by RockinRight (Just because you're pro-life and talk about God a lot doesn't mean you're a conservative.)
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To: Travis McGee
Travis, the problem is that folks don't understand that the way not to fly into canyon walls is not to fly into the box canyon in the first place. Now that we are there, it is just a matter of which side of the canyon we want them to bury the remains.

It isn't like we didn't have fair warning from the last 3000 years of financial debacles. And it not like Greenspan was ignorant of what he was doing given his former writings on the role of gold as an indicator of the health of a currency.

24 posted on 11/20/2007 6:13:18 AM PST by AndyJackson
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To: Travis McGee

Well, to be honest, I could also see the Euro and Yuan eventually tanking and the dollar beginning to rise sooner than many think.

What has happened here has also happened in Europe and China although they’re a year or so behind us (credit issues, etc...)


25 posted on 11/20/2007 6:13:40 AM PST by RockinRight (Just because you're pro-life and talk about God a lot doesn't mean you're a conservative.)
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To: Travis McGee

clip

China’s dollar peg.
The Fed’s loose monetary policy has succeeded in driving down the dollar with respect to many other currencies, particularly the Euro. Yet the yuan is still linked to the dollar despite China’s aggressive monetary expansion. How can this be? Surely the dollar depreciation should have broken the peg and forced the yuan to appreciate? Well, like all things economic, we have been there before.

http://www.safehaven.com/article-8427.htm


26 posted on 11/20/2007 6:15:31 AM PST by Realism (Some believe that the facts-of-life are open to debate.....)
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To: Travis McGee
When WAS the last outside audit of the gold allegedly in Fort Knox?

What is "Never," Alex?

27 posted on 11/20/2007 6:17:08 AM PST by CholeraJoe (Be unique. It makes it easier for the rest of us to identify the morons.)
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To: Ann Archy
Isn’t Greenspan to blame for a lot of this mess with LOW INTEREST rates??

I think so. He was Mr. Bubble for years, when we needed a Paul Volcker to give us our castor oil, in order to avoid greater pain later. It's hard to cut off the punch bowl though, a fed chairman is much more popular if he keeps the party going right to the inevitable bitter end.

Poor Bernanke has inherited an impossible situation.

"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

28 posted on 11/20/2007 6:18:39 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Moonman62
There needs to be coordinated intervention to support the dollar while the Fed cuts rates.

How? The two are contradictory.

29 posted on 11/20/2007 6:19:49 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: RockinRight
Why not leave it flat?

If you mean leave the rate where it is, Bernanke won't because Cramer and the street scream the loudest, and because Bernanke's background tells us he believes the Great Depression was caused by not enough liquidity injection. He'll drop the rates, but it won't solve the problem.

30 posted on 11/20/2007 6:23:18 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: RockinRight
Well, to be honest, I could also see the Euro and Yuan eventually tanking and the dollar beginning to rise sooner than many think.

They will tank after the dollar is a total wreck, and the global financial system is likewise wrecked. I don't see rabbits coming out of hats.

31 posted on 11/20/2007 6:24:35 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: AndyJackson

Amen.


32 posted on 11/20/2007 6:25:07 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: NeoCaveman

Something tells me we may have to start over and redo it, sooner rather then later.


33 posted on 11/20/2007 6:26:05 AM PST by winodog ( Coming Attractions: They cant legislate morality but can legislate hate)
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To: CholeraJoe

Who do we ask to conduct said outside audit of Fort Knox?

Or do the PTB scoff at such requests, like the Wizard of Oz’ gate keeper?


34 posted on 11/20/2007 6:26:39 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: winodog
Something tells me we may have to start over and redo it, sooner rather then later.

We've been doomed before: 1982, 1987, 1989, 1991, 1998, 2001, and yet we make it out bigger and better.

35 posted on 11/20/2007 6:29:13 AM PST by NeoCaveman ("Don't doubt me" - The Great El Rushbo)
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To: Realism
From your link:

Manipulating currencies is not a costless exercise, far from it. To prevent the yuan appreciating against the dollar China's central bank (People's Bank of China) has to print more and more yuan with which to buy dollars. While this has been going on domestic credit expansion has reached dangerous levels. M2, currency and credit has been racing ahead at more than 17 per cent a year. This is akin to a runaway monetary train. Not surprisingly, manufacturing investment, real estate and the stock market are booming. Since last year alone the Shanghai stock market index has rocketed by more than 300 per cent. This has all the earmarks of a classic boom.

The PBOC is certainly not blasé about the situation. It has raised interest rates four times this year, with the one-year rate now standing at 7.02 per cent. These increases have not even dented the boom. This has led the PBOC to make noises about further interest rate hikes. It can make all the noises it likes, but this monetary-driven boom is going to require a little more fortitude on the part of the bank. The problem is not a purely monetary one. There is the vital question of the capital structure to be taken into account, a question that will have to be left for another article. Suffice to say for now that the distortions caused by a reckless monetary policy will require painful adjustments.

When the Chinese real estate and stock markets crash and burn (as they must) the entire global fnancial house of cards is going to be rocked.

36 posted on 11/20/2007 6:33:06 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: NeoCaveman
We've been doomed before: 1982, 1987, 1989, 1991, 1998, 2001, and yet we make it out bigger and better.

"Just one more drink, bartender!" doesn't work forever.

"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

37 posted on 11/20/2007 6:34:24 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: NeoCaveman

Small taters compared to the shindig the politicians have set us up for.


38 posted on 11/20/2007 6:35:29 AM PST by winodog ( Coming Attractions: They cant legislate morality but can legislate hate)
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To: Travis McGee

On a happier note, the Univ of NM has not renewed the contract of Charles Truxillo the Atzlan nutjob.

He’s suing, of course.


39 posted on 11/20/2007 6:36:08 AM PST by Tijeras_Slim
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To: Tijeras_Slim

There’s a glimmer. What did him in?


40 posted on 11/20/2007 6:36:58 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Travis McGee

No real reason given, for obvious reasons, by UNM. But the speculation is Ward Churchill quality scholarship.


41 posted on 11/20/2007 6:38:16 AM PST by Tijeras_Slim
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To: Travis McGee
"Just one more drink, bartender!" doesn't work forever.

What can I say, I've been fooled too many times by chicken littles to become a gloomer now.

Quite frankly I believe in American exceptionalism and that includes are wounderous 14 trillion dollar plus economy.

42 posted on 11/20/2007 6:39:47 AM PST by NeoCaveman ("Don't doubt me" - The Great El Rushbo)
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To: Travis McGee
the entire global fnancial house of cards is going to be rocked.

So be it..... Maybe we can get some manufacturing and tech. industries back when hyperinflation blows the lid off imports.

43 posted on 11/20/2007 6:45:10 AM PST by Realism (Some believe that the facts-of-life are open to debate.....)
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To: NeoCaveman

“and yet we make it out bigger and better”

To do that we need to return to 1929!!


44 posted on 11/20/2007 6:49:16 AM PST by dalereed
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To: NeoCaveman

I sincerely hope that you’re right and I’m wrong.


45 posted on 11/20/2007 6:50:37 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Tijeras_Slim

I can imagine!


46 posted on 11/20/2007 6:51:06 AM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: Travis McGee

Your dead on. It’s coming into an election year. The GOP will want to band aid the economy and I will predict they will cut the rates again.

My take on it is this. Leave the rates alone and allow the recession now. I am now really very seriously concerned with an economic collapse in early 2009. Once the Bejjing Olympics are done with except China to liquidate all their entire Treasury Bond position. They know how to make more money elsewhere. Oil, credit crunch, healthcare costs, a sliding real estate market are beginning to take a toll on consumers and this is just the start of the real pain. Having Hillary win the election due to a bad economy wouldn’t be pretty but I don’t think band-aiding it now is going to make all that much difference come election time.


47 posted on 11/20/2007 7:01:22 AM PST by quant5
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To: Realism

Unfortunately we can’t generate anywhere close to everything our country needs now. Like oil... sans energy what will make the factories go?


48 posted on 11/20/2007 7:01:25 AM PST by HiTech RedNeck (Beat a better path, and the world will build a mousetrap at your door.)
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To: Moonman62; BlabItGrabIt
The Fed needs to do a big rate cut now just to keep up with reality keep the bubble nice and inflated, bail out the irresponsible borrowers, lenders, and speculators, and ensure that those who produce, and borrow and spend wisely, bear the burden while the irresponsible walk free.

There. Fixed it.

49 posted on 11/20/2007 7:07:22 AM PST by Nervous Tick (Retire Ron Paul! Support Chris Peden (www.chrispeden.org))
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To: Nervous Tick

If you can find a way to specifically punish people who did wrong, then I’ll support it. Otherwise, interest rates are a blunt instrument that punish everybody and they are still too high considering bond yields and what’s happening in the economy.


50 posted on 11/20/2007 7:24:37 AM PST by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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