Posted on 05/01/2006 2:05:39 AM PDT by RWR8189
TOKYO, May 1 (Reuters) - The dollar struck a seven-month low against the yen and a one-year low against the euro on Monday, extending a slide as the Federal Reserve appears set to soon end a two-year run of credit tightening. A renewed focus on U.S. deficits after last month's meeting of Group of Seven industrialised powers, worries about Iran's nuclear ambitions and deteriorating technical signals have pummeled the dollar across the board.
The yen gained across the board on solid buying by foreign hedge funds and investment banks, while some Japanese players squared positions heading into the country's Golden Week holidays on Wednesday through Friday.
The move was exacerbated by thin trading conditions with many major financial centres, including Singapore and Hong Kong, closed for holidays. Dealing desks in Tokyo were lightly staffed. Analysts said the dollar's drop may deepen in the days ahead even as market players have built up huge short positions, typically a sign that a reversal of a trend could be in store.
"It will take time until all market participants have the impression they have done enough on the dollar's downside," said Kikuko Takeda, currency strategist at Bank of Tokyo-Mitsubishi UFJ.
Iran in particular was a focus. United Nations ambassadors from the United States, Britain and France are expected to submit a resolution this week to legally oblige Iran to comply with Security Council demands, so far rebuffed by Tehran.
After Fed Chairman Ben Bernanke suggested last week that the central bank is almost done raising rates but that the central bank's actions would depend on upcoming economic data, investors are eyeing two key reports later in the day.
The Fed's favoured inflation gauge, the core personal consumption expenditures index, is due at 1230 GMT along with the personal income and consumption report. The core PCE is forecast to show a rise of 0.2 percent in March versus a 0.1 percent month-on-month gain in February.
The Institute for Supply Management's monthly manufacturing PMI, closely watched for trends in the industrial sector, is expected to show a slip to 55.0 in April from 55.2 in March. The ISM report is due at 1400 GMT.
Markets in many European countries will also be shuttered on Monday, while U.S. markets will be open as usual.
The dollar fell as low as 113.03 yen on electronic trading platform EBS. By 0720 GMT the dollar was changing hands around 113.15 yen, holding above technical support at 113.
The single European currency slid 0.5 percent to 142.85 yen from 143.75.
The euro edged up to a fresh high of $1.2643 on electronic trading platform EBS, the highest since May last year, before slipping back to $1.2625. Sterling climbed to an eight-month high of $1.8281.
The Australian dollar touched a seven-month high while the Canadian dollar strengthened to a 28-year peak of C$1.1157.
APRIL SHOWERS
Last week's sharp slide capped a rough April for the dollar. The dollar's trade-weighted index fell 4 percent in April, the biggest drop since September 2003, with the U.S. currency chalking up its biggest losses against the safe-haven Swiss franc and pound.
Reflecting the big bets against the dollar, speculators on the International Monetary Market racked up a record net long position in the euro of 65,525 contracts through last Tuesday.
The Fed is widely expected to raise rates for a 16th straight time to 5 percent at its meeting on May 10 but then to take a break to assess the impact of the repeated credit tightening.
By contrast, the European Central Bank is expected to press ahead with its own campaign of raising rates all year while the Bank of Japan is expected to bump up overnight rates as soon as July, in what would be the first hike in six years.
"The short-term risks are heavily biased that the dollar stays on the defensive," said Junya Tanase, currency strategist at JPMorgan Chase, in a note to clients.
Apparently our government does not want to preserve the purchasing power of the USD.
The FOREX is the world's wealth secret; therefore, the big boys ain't goin' let the $ sink too low--nor rise too high!
So do you want to purchase more imported products with your money, or not? Make up your mind.
So do you now understand the inability of our Govt to deal with illegal immigration? It's raising the standards of the "Americas" from Canada to Argentina - Open Boarders!
Actually, he said that to fight deflation, if all else failed, you could throw money out of a helicopter. But don't let the truth interfere with your rant.
>>Make up your mind.
Who are you talking to?
One of the few legitimate functions of government is securing the value of the currency. It's not doing a good job of it.
Does your time frame extend beyond seven months?
Time frame for what?
For "securing value of the currency."
Of course - however, this should be done with a regime of higher interest rates, lower taxes on investment, a consumption tax to replace the current income tax, and much less government spending - not an engineered devaluation.
So you're saying that China and India are becoming wealthy at our expense? How are you measuring this wealth? Please show us a metric proving that their wealth is increasing at our expense.
The trade deficit is a function of our tax policy, overregulation of US business, and government spending.
The USD has already fallen in trade weighted terms by 40% since 2002, with little effect on the trade deficit.
This is because most of the trade deficit is due to our consumption of oil.
A weaker dollar won't help to lower oil prices.
Our central bank is also engaging in the competitive devaluation frenzy.
"All your lovely globalist capitalists"
Belong to us!
Sorry. :)
The numbers with India are even more in our favor. I think if you look at the value of the dollar over a longer term you'll see that it's been holding it's own even though oil and gold have been skyrocketing. The dollar is still the currency that must be used if you want to trade commodities in the global marketplace.
Our central bank is also engaging in the competitive devaluation frenzy.
How are they doing this if they've increased rates 16 times since 2004?
I do not like your prescription for curing the trade deficit by cheapening the dollar.
An alternative is to keep the dollar strong, buy less foreign goods (buy hybrids, cut oil imports, don't buy cheap crap, keep you old tv instead of buying a big plasma, etc) and make really good domestic goods like better autos, computers, etc. and export them not because they are cheap due to a low dollar, but because they are good products.
If we got rid of stupid labor union rules, had more people believe in good work habits, had tort reform, tax reform that encouraged saving and work, replace the income tax with a sales tax, drilled for oil and built nukes, we would have a strong dollar AND a much reduced trade deficit.
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