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.”
No real reason given, for obvious reasons, by UNM. But the speculation is Ward Churchill quality scholarship.
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.
So be it..... Maybe we can get some manufacturing and tech. industries back when hyperinflation blows the lid off imports.
“and yet we make it out bigger and better”
To do that we need to return to 1929!!
I sincerely hope that you’re right and I’m wrong.
I can imagine!
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.
Unfortunately we can’t generate anywhere close to everything our country needs now. Like oil... sans energy what will make the factories go?
There. Fixed it.
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.
>> 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
That’s an interesting point, and well taken.
It hangs on how you define “did wrong”. Do you mean “broke rules”? Or something else?
I think it’s valid for the “system” (which I loosely define as the “marketplace” plus “government influence”) to “punish” not only those who broke rules, but also those who speculated with poor judgment, who gamed the system for personal or corporate gain, and so forth. Do you agree?
I might also point out that I endorse your description of interest rates as a blunt instrument — and I note that it cuts both ways (apologies for the mixed metaphor).
Lowering interest rates to loosen up credit to aid (primarily) those who made the bed of nails they now don’t wish to sleep in, “punishes” many who behaved with fiscal responsibility. Is it any more fair to punish innocents with too-low rates, than to accept similar collateral damage from raising rates or leaving them high?
I hope I’m wrong.
The news just keeps getting “better.” I think that the bottom is now in and the smart money will start scooping up the bargains.[/sarcasm]
AP
Freddie Mac Loses $2B, Seeks New Capital
Tuesday November 20, 11:20 am ET
By Marcy Gordon, AP Business Writer
Freddie Mac Sets Aside $1.2 Billion in 3Q for Bad Home Loans; Seeking New Sources of Capital
IMO, I have sadly concluded that's exactly where we are headed. Stupidity and greed have triumphed. This entire dodgy situation is coming to a head very fast. It is unlikely the Fed or anybody else can keep the all the balls juggling until after the election. The electorate's reaction to plunging into this abyss will be to really throw out the GOP this time - entirely the wrong move but the most likely one. It will be like 1932, redux.
This blame game is extremely well coordinated by the Dems and the MSM. One need only look at the higher price of oil today than a year ago and now hear the deafening silence on this subject from Congress now that the Dems are in charge there. The volume on troubles only goes up when the GOP is in charge.
This has gone beyond our government doing what is good for America and the American People. It has become all about gaining naked power, just like the Iraq War. Facts no longer matter, just perceptions.
We certainly overdid the cuts in the last 2 sessions. The fed was over-reacting to the "subprime" scare, without giving strong consideration to the inflationary effects of the weak dollar. The price of oil and all imported goods will increase in terms of dollars even though they are not becoming scarce. What needs to become scarce is dollars.
Actually, yes, at least in part. He correctly lowered rates to give liquidity after 9/11, but then failed to bring them back up quickly enough. The result was several years of easy money for borrowers.
He needed to raise rates, over time, at least 1 more percentage point before stopping. That should have been done back in 2003 or 2004.
this is, of course, my own opinion.
Be sure to thank Bush for our 9 TRILLION dollar national debt.
God help us.
It’s all Bush’s fault. Yes it is.
Well said. Savers keep getting screwed.
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