Dollar hits 14-year sterling low; 20-month euro low

Marketwatch ^ | Nov 30, 2006 2:30 PM ET | Wanfeng Zhou, MarketWatch

[Ernest_at_the_Beach]

NEW YORK (MarketWatch) -- The dollar tumbled against major currencies Thursday, hitting a 14-year low against the British pound and a fresh 20-month low versus the euro, after the latest round of economic news fueled concerns the U.S. economy is headed for a sharp slowdown.

The U.S. currency sold off sharply after a report showed business activity in the Chicago region slowed to its lowest level in more than three years in November. The Chicago purchasing managers index fell to 49.9% in November from 53.5% in October. Economists were expecting the index to rebound slightly to 54.4%.

"For the first time since April 2003, Chicago manufacturing conditions reached contractionary levels," said Kathy Lien, chief strategist at FXCM. "This is the first time that we are hearing the recessionary bells ring and the market is not taking this well."

In New York trading, the dollar was quoted at 115.77 yen, compared with 116.38 yen late Wednesday. The euro changed hands at $1.3242, up from $1.3149, after touching $1.3274, the highest level since late March, 2005.

The British pound traded at $1.9657, compared with $1.9451, after rising as high as $1.9698, the loftiest level since 1992. The dollar changed hands at 1.1981 Swiss francs, compared with 1.2098 francs.

[Cacique]

btt

[bert]

Kingsport Tennessee. The new facility is a major enlargement of an existing facility in what is known a Piney Flats.

[oceanview]

let's see what happens when he comes back from china.

[The_Englishman]

Looks like we'll be over to visit y'all, rather than the other way round.

[Ernest_at_the_Beach]

Well, be sure and come out West,...see the Grand Canyon...it's pretty special...

[NVDave]

Devaluing the dollar won't have that much effect on the Yuan. The PRC has pegged the Yuan to be X% of the US dollar. So you drop the dollar, and the yuan goes down correspondingly.

Now, in so doing, we make oil imports into the US go up in price, and they will go up for China as well. But that goes only so far.

The issue isn't what the specific value of the Yuan is right now. The issue is that the PRC has the peg in place. If the Yuan floated against the USD as the Euro, Pound, etc do, then there wouldn't be as much of a problem.

[oceanview]

the yuan has already moved 5.5% against the dollar. but is still undervalued by about 35%. this is why paulsen and bernanke are going to china. this has gone on too long.

[NVDave]

Here's my prediction, FWIW: They come back with empty promises in their ears. In the next two years (ie, the years remaining to the second Bush term) the PRC allows another couple of percentage points of float, no more.

Without the PRC buying so much US debt, long-term rates woul dbe higher than they are now.

Ultimately, the only solution that will work is tariffs.

[oceanview]

china has to buy that debt - that's how they maintain their peg.