Simple. It's not. It's actually at a 2-month low.
Posted on 11/15/2005 2:22:58 AM PST by RWR8189
TOKYO (Reuters) - The dollar clung close to a two-year high against the euro and a 27-month peak versus the yen on Tuesday as more investors flock to the U.S. currency for its widening yield advantage.
The yen came under pressure after Japanese Prime Minister Junichiro Koizumi made a rare comment on central bank policy, saying it was too early for the Bank of Japan to end its ultra-loose "quantitative easing" until deflation is defeated.
Koizumi's remarks on Monday added to a chorus of government officials calling for the BOJ, which gained political independence just in 1998, to work with the government in fighting deflation.
Finance Minister Sadakazu Tankigaki said on Tuesday specific policy was up to the BOJ but monetary policy was broadly up to the government and the two should work together.
The pointed criticism has given market players more reason to think the central bank would be cautious about lifting rates from virtually zero, which has hobbled the yen this year.
Tomoko Fujii, senior currency strategist at Bank of America in Tokyo, said the political rhetoric suggested a consensus on the BOJ eventually changing policy "might need some more time".
"Short-term rate expectations remain the single most important factor for dollar/yen," Fujii said, adding that the political spat was "used as an excuse to sell the yen".
Traders said U.S. Treasury coupon payments totaling $22.3 billion on Tuesday could support the yen if Japanese investors repatriate some of their share.
In midday Asian trade, the dollar hovered near 118.80 yen. It climbed as high as 118.92 yen the previous session on electronic trading platform EBS, the best since August 2003.
The euro fetched 138.90 yen, also little changed and up from a one-month low of 137.50 yen hit on Friday.
Mounting signs of a sustained economic recovery and a pending end to more than seven years of deflation in Japan have prompted BOJ officials to signal plans to scrap their super-loose policy that holds rates near zero sometime in 2006
Most economists expect slight inflation to return late this year. But BOJ officials including Governor Toshihiko Fukui have said that even after ending quantitative easing, they will be patient before tightening policy by raising rates.
MORE ROOM TO RUN
The euro was at $1.1695, holding just above a low of $1.1660 hit on Monday, the weakest since November 2003.
Analysts say the dollar's rampant run higher is likely to last for a while longer as the currency's break of key technical levels against the euro and the yen will probably prod more investors and speculators to join the rally.
"We see scope for dollar strength to continue and to broaden," said currency strategists at Morgan Stanley in a note to clients.
Tuesday offers several key events for the market, including euro zone growth figures for the third quarter and U.S. data on wholesale prices and retail sales. Also on tap are congressional hearings for Federal Reserve Chairman nominee Ben Bernanke.
The Fed's 16-month campaign of steady interest rate increases to 4 percent from 1 percent has gradually lured more investors to the dollar and U.S. bonds. Several economists see overnight rates rising to at least 4.5 percent next year. In his testimony before the Senate Banking Committee, Bernanke is expected to stress his inflation-fighting credentials and say policy will not change much if he is allowed to take the reins from Alan Greenspan, who is set to retire on January 31.
Increasing signs from the European Central Bank that they are prepared to raise rates from a historic low of 2 percent in coming months have offered only slight relief to the euro.
On the sidelines of a conference in Mexico City late on Monday, ECB Chief Economist Otmar Issing said the central bank would take the necessary action to keep inflation in check.
Yeah, well with the disintegration of France the dollar is going to go stratospheric against the Euro. I hope Soros still has lots of money invested in the Euro.
Bush's fault.
Bush lied, euros died [/sarcasm]
Knowing Soros, he sent his workers of the world party stooges to start the riots, sold Euros, bought dollars and is sending the profits to Moron.org.
"Bush lied, euros died [/sarcasm"
That's actually pretty funny!
Soros hates America too much to be doing that. I imagine he is still betting against the dollar, although that would be pretty stupid since the feds are knocking up the rates.
I read that Warren Buffet also took a bath on the Euro.
Why is the Canadian dollar at a 13-year high against the US dollar though?
My guess is that Canada is rich in natural resources, including oil. The runup in the loonie corresponded with the runup in energy prices. My bet is that the highs have been printed for the canadian dollar.
Simple. It's not. It's actually at a 2-month low.
Worst economy since Hoover!
/sarc
The DEMS view of the world.
Couple things:
- It's been a while since we heard about the trade deficit. Expect the headlines and all the doom all over again. It was hysteria over the trade deficit that drove the dollar downward last year in the first place. It won't resonate this time.
- Expect increased dollar inflows, especially from repatriated money. If U.S. co.'s have assets in other currencies they're gonna be selling into dollars to avoid further losses on those holdings. Also, there's an ongoing tax advantage in bringing overseas profits home.
- Crude will cheapen as the dollar strengthens. A huge part of the crude bubble comes of last year's dollar sell-off. We sure won't be hearing any more from Putin, Chavez, the Mullahs and other fools that oil should be traded in euros.
- Another part of the dollar sell-off has been uncertainty in Iraq. The dollar will tighten as the overall news gets better from there -- which it will (and has been).
- Finally, Wall St. is gonna perk up along with these developments. It's not that the dollar value sets other trends, it's that it is reflective of them.
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