The dollar fell against the euro on Wednesday after a quarter-point interest rate cut from the US Federal Reserve failed to dispel jitters about the outlook for the US economy.
In early European trading, the euro rose to 1.4685 dollars from 1.4655 dollars in New York late on Tuesday.
The dollar dropped against the euro in the wake of the decision by the US Federal Reserve's Federal Open Market Committee (FOMC) to lower its benchmark Fed funds rate by 25 basis points to 4.25 percent.
The cut disappointed some investors who had been seeking a more aggressive reduction to help shore up stocks and the American economy in the face of the ongoing fallout from the US subprime mortgage crisis, dealers said.
But a half-point reduction might have hurt the greenback if it discouraged investors from holding on to their dollar-denominated investments, they added.
The Fed also cut the discount rate, its lending rate for commercial banks, by a quarter point to 4.75 percent, despite some analyst forecasts for a sharper 50 basis point cut to help stimulate credit flows.
"The negative reaction in the financial markets to the decision of the FOMC to lower the federal funds and discount rates by 0.25 points underlined the very difficult financial market conditions that still prevail and indicated that more monetary easing will be required in order to limit the impact on the real economy," said analyst Derek Halpenny at The Bank of Tokyo-Mitsubishi.
The US cut followed a decision by the Bank of England to cut British interest rates to 5.50 percent last week while the European Central Bank held eurozone borrowing costs at 4.0 percent.
"The Fed's action does not match its view of the economy," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
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Showing posts with label Money. Show all posts
Showing posts with label Money. Show all posts
Wednesday, December 12, 2007
Monday, December 10, 2007
US dollar woes far from over
2000 years ago, Rome was running a trade shortfall equivalent to 3% of its total economy, one of the many factors that led to the empire’s eventual downfall.
Fifty years ago, Brazil had a massive trade deficit, which were critical to its decline – the currency was battered over and over again.
Eight years ago, the tiger economies of Asia were plunged into a currency crisis, due to big domestic and over-reliance on foreign capital.
Today, international bodies assert that if a country’s trade deficit exceeds 4.5% of its gross deficit product (GDP), it’s a sign of real and present economic danger.
And yet the US economy continues to flaunt history and economics. At 6.4% of GDP (US$58.9bil), US trade deficits are perilous and significantly exceed those of Rome, Brazil or any Asian country one decade ago.
With the recent decline of the US dollar, there are good reasons to expect its slide to continue. Weak economic numbers triggered the fall of the greenback against slower housing starts, sluggish durable goods orders and lethargic consumer confidence – all point to a correction in the economy.
Compounding this is the US’ current account and budget deficit (3.5% of GDP) as well as the narrowing interest rate differential between the US and regional Asian countries. The impact of the subprime market and the widespread repercussions on consumer and corporate consumption exacerbates the dollar woes. All these factors combined offer the possibility of a prolonged economic malaise which continues to weigh down the dollar.
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Fifty years ago, Brazil had a massive trade deficit, which were critical to its decline – the currency was battered over and over again.
Eight years ago, the tiger economies of Asia were plunged into a currency crisis, due to big domestic and over-reliance on foreign capital.
Today, international bodies assert that if a country’s trade deficit exceeds 4.5% of its gross deficit product (GDP), it’s a sign of real and present economic danger.
And yet the US economy continues to flaunt history and economics. At 6.4% of GDP (US$58.9bil), US trade deficits are perilous and significantly exceed those of Rome, Brazil or any Asian country one decade ago.
With the recent decline of the US dollar, there are good reasons to expect its slide to continue. Weak economic numbers triggered the fall of the greenback against slower housing starts, sluggish durable goods orders and lethargic consumer confidence – all point to a correction in the economy.
Compounding this is the US’ current account and budget deficit (3.5% of GDP) as well as the narrowing interest rate differential between the US and regional Asian countries. The impact of the subprime market and the widespread repercussions on consumer and corporate consumption exacerbates the dollar woes. All these factors combined offer the possibility of a prolonged economic malaise which continues to weigh down the dollar.
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Tuesday, November 27, 2007
The US dollar: the long farewell?
It's just straws in the wind so far. India's Ministry of Culture announces that foreign tourists can no longer pay in dollars when visiting the Taj Mahal and other heritage sites; they have to pay in good, hard rupees. Iran and Venezuela call for a joint OPEC statement on the weak US dollar, and Saudi Arabian Foreign Affairs Minister Saud Al-Faisal warns that any public reference to the US dollar's problems could cause the troubled currency to "collapse". Rap star Jay-Z's latest video shows our hero flashing a wad of euros, not dollars.
Only straws in the wind, but all in the past couple of weeks. For the majority of Americans who do not travel abroad, the only visible effect so far of the dollar's steep fall has been higher fuel prices at the pump.
The Chinese imports that fill the big-box stores still cost the same, because the Chinese yuan is still pegged to the American dollar. But that may be about to change, along with many other things.
At the beginning of 2003, one euro bought one US dollar. Eighteen months ago, it bought $1.20. Now it is pushing $1.50, and there is no reason to think that it will stop there. Three of the world's biggest oil exporters, Iran, Venezuela and Russia, are demanding payment in euros rather than US dollars. Last week a Chinese central bank vice-director, Xu Jian, gave voice to the suspicion of many others, saying that the US dollar was "losing its status as the world currency."
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Only straws in the wind, but all in the past couple of weeks. For the majority of Americans who do not travel abroad, the only visible effect so far of the dollar's steep fall has been higher fuel prices at the pump.
The Chinese imports that fill the big-box stores still cost the same, because the Chinese yuan is still pegged to the American dollar. But that may be about to change, along with many other things.
At the beginning of 2003, one euro bought one US dollar. Eighteen months ago, it bought $1.20. Now it is pushing $1.50, and there is no reason to think that it will stop there. Three of the world's biggest oil exporters, Iran, Venezuela and Russia, are demanding payment in euros rather than US dollars. Last week a Chinese central bank vice-director, Xu Jian, gave voice to the suspicion of many others, saying that the US dollar was "losing its status as the world currency."
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Monday, November 26, 2007
Euro trades close to 1.50 dollars
The euro crept higher on Monday after striking a series of historic peaks close to 1.50 dollars last week as dealers worried about the health of the US economy.
The European single currency stood at 1.4865 dollars, compared with 1.4836 late in New York on Friday.
The euro has struck an historic 1.4967 dollars on Friday. The dollar has since rebounded slightly, boosted by a rebound on Wall Street late last week after a busy start to the US holiday season, dealers said.
With no major data pegged for release on Monday, dealers looked to US existing home sales data due out Tuesday and new home sales figures set for Wednesday.
"This week, the dollar should remain on the back foot," Commerzbank analyst Gavin Friend said.
"Fresh housing data is likely to confirm market concerns on possible billions of writedowns in the US financial sector," he added.
The dollar has fallen sharply this year against other world currencies, hit by a US housing slump
that has brought tightening credit conditions.
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The European single currency stood at 1.4865 dollars, compared with 1.4836 late in New York on Friday.
The euro has struck an historic 1.4967 dollars on Friday. The dollar has since rebounded slightly, boosted by a rebound on Wall Street late last week after a busy start to the US holiday season, dealers said.
With no major data pegged for release on Monday, dealers looked to US existing home sales data due out Tuesday and new home sales figures set for Wednesday.
"This week, the dollar should remain on the back foot," Commerzbank analyst Gavin Friend said.
"Fresh housing data is likely to confirm market concerns on possible billions of writedowns in the US financial sector," he added.
The dollar has fallen sharply this year against other world currencies, hit by a US housing slump
that has brought tightening credit conditions.
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Tuesday, November 20, 2007
OPEC May Seek Non-U.S. Dollar Currency
Iranian President Mahmoud Ahmadinejad said Sunday that oil cartel OPEC is interesting in converting its cash reserves into a currency other than the depreciating U.S. dollar, which he called a "worthless piece of paper."
"They get our oil and give us a worthless piece of paper," Mr. Ahmadinejad told reporters after the close of the summit in the Saudi capital of Riyadh.
The Iranian hard-liner blamed the falling dollar on President Bush's policies and their allegedly negative effect on other nations.Oil prices globally are tied to the U.S. dollar.
Oil producers have become concerned about that recently as the falling dollar may be contributing to higher oil prices and a decreasing value of dollar reserves.
"All participating leaders showed an interest in changing their hard currency reserves to a credible hard currency," Mr. Ahmadinejad said. "Some said producing countries should designate a single hard currency aside from the U.S. dollar ... to form the basis of our oil trade."
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"They get our oil and give us a worthless piece of paper," Mr. Ahmadinejad told reporters after the close of the summit in the Saudi capital of Riyadh.
The Iranian hard-liner blamed the falling dollar on President Bush's policies and their allegedly negative effect on other nations.Oil prices globally are tied to the U.S. dollar.
Oil producers have become concerned about that recently as the falling dollar may be contributing to higher oil prices and a decreasing value of dollar reserves.
"All participating leaders showed an interest in changing their hard currency reserves to a credible hard currency," Mr. Ahmadinejad said. "Some said producing countries should designate a single hard currency aside from the U.S. dollar ... to form the basis of our oil trade."
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Tuesday, November 13, 2007
Weak U.S. Dollar May Be `Checkmate' for the Fed: Caroline Baum
When the Federal Reserve talks about the risks to the economy, be it slower growth or higher inflation, it's usually an either/or proposition.
What if it's both? What if the U.S. economy is facing the prospect of slower growth and higher inflation, a dual diagnosis requiring offsetting actions for each symptom?
Certainly that's where the risks lie, as Fed Chairman Ben Bernanke pointed out in congressional testimony last week.
``The Committee recognized that risks remained to both of its statutory objectives of maximum employment and price stability,'' Bernanke said, explaining policy makers' outlook at the conclusion of the Oct. 30-31 meeting.
Bernanke enumerated the ``downside risks'' to the Fed's already slow-growth forecast: a deterioration in financial market conditions; a further tightening of credit standards; a steep decline in home prices that depresses consumers' willingness to spend; and a deceleration in business investment in response to a dimming economic outlook.
As for inflation, it's the usual suspects that pose a risk, according to the Fed chief: the soaring price of oil and other commodities and the decline in the foreign exchange value of the dollar. These price changes may be symptoms, not causes; they may be relative price shifts (in the case of commodities), not inflation per se. The Fed doesn't elaborate on how it views the cause-effect relationship between policy and prices.
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What if it's both? What if the U.S. economy is facing the prospect of slower growth and higher inflation, a dual diagnosis requiring offsetting actions for each symptom?
Certainly that's where the risks lie, as Fed Chairman Ben Bernanke pointed out in congressional testimony last week.
``The Committee recognized that risks remained to both of its statutory objectives of maximum employment and price stability,'' Bernanke said, explaining policy makers' outlook at the conclusion of the Oct. 30-31 meeting.
Bernanke enumerated the ``downside risks'' to the Fed's already slow-growth forecast: a deterioration in financial market conditions; a further tightening of credit standards; a steep decline in home prices that depresses consumers' willingness to spend; and a deceleration in business investment in response to a dimming economic outlook.
As for inflation, it's the usual suspects that pose a risk, according to the Fed chief: the soaring price of oil and other commodities and the decline in the foreign exchange value of the dollar. These price changes may be symptoms, not causes; they may be relative price shifts (in the case of commodities), not inflation per se. The Fed doesn't elaborate on how it views the cause-effect relationship between policy and prices.
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Friday, November 9, 2007
Pound touches new US dollar highs
The UK pound has remained strong against a weak US dollar on speculation that interest rates may be cut to help revive the world's biggest economy.
On Thursday, Federal Reserve boss Ben Bernanke warned of a noticeable slowdown in the US in coming months.
With interest rates unlikely to fall in other key markets, the dollar's rate of return looks unappealing to investors.
Sterling hit $2.1144 earlier for the first time since the early 1980s, while one euro hit a record of $1.4740.
The dollar also fell more than 1.5 yen to below 111 yen.
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On Thursday, Federal Reserve boss Ben Bernanke warned of a noticeable slowdown in the US in coming months.
With interest rates unlikely to fall in other key markets, the dollar's rate of return looks unappealing to investors.
Sterling hit $2.1144 earlier for the first time since the early 1980s, while one euro hit a record of $1.4740.
The dollar also fell more than 1.5 yen to below 111 yen.
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Wise heads desert falling US dollar
GISELE BUNDCHEN wants to remain the world's richest model and is insisting that she be paid in almost any currency but the US dollar.
Like billionaire investors Warren Buffett and Bill Gross, the Brazilian supermodel, who Forbes magazine says earns more than anyone else in her industry, is at the top of a growing list of rich people who have concluded that the currency can only depreciate because Americans are living beyond their means.
Even after the dollar lost 34 per cent since 2001, the biggest investors and most accurate forecasters say it will weaken further as home sales fall and the Federal Reserve cuts interest rates. The dollar plummeted to its lowest-ever last week against the euro, the Canadian dollar and the Chinese yuan, and was the cheapest in 26 years against the British pound.
"We've told all of our clients that if you only had one idea, one investment, it would be to buy an investment in a non-dollar currency," said Mr Gross, the chief investment officer of Pacific Investment Management in Newport Beach, California, and manager of the world's biggest bond fund. "That should be on top of the list," said Mr Gross, whose firm is a unit of the Munich-based insurer Allianz.
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Like billionaire investors Warren Buffett and Bill Gross, the Brazilian supermodel, who Forbes magazine says earns more than anyone else in her industry, is at the top of a growing list of rich people who have concluded that the currency can only depreciate because Americans are living beyond their means.
Even after the dollar lost 34 per cent since 2001, the biggest investors and most accurate forecasters say it will weaken further as home sales fall and the Federal Reserve cuts interest rates. The dollar plummeted to its lowest-ever last week against the euro, the Canadian dollar and the Chinese yuan, and was the cheapest in 26 years against the British pound.
"We've told all of our clients that if you only had one idea, one investment, it would be to buy an investment in a non-dollar currency," said Mr Gross, the chief investment officer of Pacific Investment Management in Newport Beach, California, and manager of the world's biggest bond fund. "That should be on top of the list," said Mr Gross, whose firm is a unit of the Munich-based insurer Allianz.
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Thursday, November 8, 2007
Little hope on horizon for troubled dollar
Stephen Jen has seen more than a few bouts of negative sentiment towards the US dollar but none as severe as today.
“This is the first time in my career that I am really worried about the dollar,” says the head of currency research at Morgan Stanley.
“I didn’t know it was going to go so far. The dollar is in trouble. What has so far been an orderly move can easily degenerate into a more violent event.”
The collapse of the dollar accelerated on Wednesday, falling to a record low of $1.4730 against the euro, taking its losses so far this year to 11.5 per cent against the single currency.
The dollar also tumbled to fresh lows elsewhere – a fresh all-time low against the Canadian dollar, a 26-year trough against the pound and its weakest level in 23 years against the Australian dollar.
The latest catalyst was comments by Cheng Siwei, vice chairman of the standing committee of China’s National People’s Congress.
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“This is the first time in my career that I am really worried about the dollar,” says the head of currency research at Morgan Stanley.
“I didn’t know it was going to go so far. The dollar is in trouble. What has so far been an orderly move can easily degenerate into a more violent event.”
The collapse of the dollar accelerated on Wednesday, falling to a record low of $1.4730 against the euro, taking its losses so far this year to 11.5 per cent against the single currency.
The dollar also tumbled to fresh lows elsewhere – a fresh all-time low against the Canadian dollar, a 26-year trough against the pound and its weakest level in 23 years against the Australian dollar.
The latest catalyst was comments by Cheng Siwei, vice chairman of the standing committee of China’s National People’s Congress.
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Wednesday, November 7, 2007
Support for U.S. dollar crumbles, sending loonie above US$1.10
The faltering U.S. dollar helped drive another big jump in the loonie Wednesday, sending it above US$1.10 in morning trading.
Indications that China may want to diversify its foreign currency stockpiles away from the U.S. greenback in part triggered the selloff.
But it's not just the decline of the American dollar that's pushing the loonie higher.
Near-record oil prices and strength in other Canadian commodities is giving the currency a boost, as well as solid economic conditions.
The rapid rise of the dollar has fuelled hopes that some consumer prices will drop but also raised alarms that the acceleration is unsustainable and could damage the economy.
Later in the morning the loonie pulled back a little from the $1.10 mark, but was still up 1.06 cents at 109.08 cents US.
Indications that China may want to diversify its foreign currency stockpiles away from the U.S. greenback in part triggered the selloff.
But it's not just the decline of the American dollar that's pushing the loonie higher.
Near-record oil prices and strength in other Canadian commodities is giving the currency a boost, as well as solid economic conditions.
The rapid rise of the dollar has fuelled hopes that some consumer prices will drop but also raised alarms that the acceleration is unsustainable and could damage the economy.
Later in the morning the loonie pulled back a little from the $1.10 mark, but was still up 1.06 cents at 109.08 cents US.
Monday, November 5, 2007
Sinking Currency, Sinking Country
The euro, worth 83 cents in the early George W. Bush years, is at $1.45.
The British pound is back up over $2, the highest level since the Carter era. The Canadian dollar, which used to be worth 65 cents, is worth more than the U.S. dollar for the first time in half a century.
Oil is over $90 a barrel. Gold, down to $260 an ounce not so long ago, has hit $800.
Have gold, silver, oil, the euro, the pound and the Canadian dollar all suddenly soared in value in just a few years?
Nope. The dollar has plummeted in value, more so in Bush's term than during any comparable period of U.S. history. Indeed, Bush is presiding over a worldwide abandonment of the American dollar.
Is it all Bush's fault? Nope.
The dollar is plunging because America has been living beyond her means, borrowing $2 billion a day from foreign nations to maintain her standard of living and to sustain the American Imperium.
The prime suspect in the death of the dollar is the massive trade deficits America has run up, some $5 trillion in total since the passage of NAFTA and the creation of the World Trade Organization in 1994.
In 2006, that U.S. trade deficit hit $764 billion. The current account deficit, which includes the trade deficit, plus the net outflow of interest, dividends, capital gains and foreign aid, hit $857 billion, 6.5 percent of GDP. As some of us have been writing for years, such deficits are
unsustainable and must lead to a decline of the dollar.
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The British pound is back up over $2, the highest level since the Carter era. The Canadian dollar, which used to be worth 65 cents, is worth more than the U.S. dollar for the first time in half a century.
Oil is over $90 a barrel. Gold, down to $260 an ounce not so long ago, has hit $800.
Have gold, silver, oil, the euro, the pound and the Canadian dollar all suddenly soared in value in just a few years?
Nope. The dollar has plummeted in value, more so in Bush's term than during any comparable period of U.S. history. Indeed, Bush is presiding over a worldwide abandonment of the American dollar.
Is it all Bush's fault? Nope.
The dollar is plunging because America has been living beyond her means, borrowing $2 billion a day from foreign nations to maintain her standard of living and to sustain the American Imperium.
The prime suspect in the death of the dollar is the massive trade deficits America has run up, some $5 trillion in total since the passage of NAFTA and the creation of the World Trade Organization in 1994.
In 2006, that U.S. trade deficit hit $764 billion. The current account deficit, which includes the trade deficit, plus the net outflow of interest, dividends, capital gains and foreign aid, hit $857 billion, 6.5 percent of GDP. As some of us have been writing for years, such deficits are
unsustainable and must lead to a decline of the dollar.
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Thursday, November 1, 2007
Aussie passes US93c after rate cut
THE Australian dollar cracked US93c on Wednesday, hitting a 23-year high as a widely anticipated US interest rate cut triggered a resurgence of confidence in growth asset markets.
In a sign of renewed risk appetite in foreign-exchange markets, the Australian dollar also hit a 16-year high against the lower-yielding Japanese yen.
The currency is expected to build a support base around its current level as it awaits a widely expected Australian rate rise next week.
At 4.45pm Sydney time, the Australian dollar was quoted at US93.12c, up from US92.17c late on Wednesday, but below an intraday high of US93.42c.
The Australian dollar is at the highest it has been since April 1984.
Against the Japanese yen, the Australian dollar was at Y107.29, up from Y105.71, and hit a high of Y107.85 during the session.
The flight of funds to assets like the Australian dollar and equity markets and expectations of a Reserve Bank of Australia 25-basis-point interest rate rise next week weighed on the Australian bond market.
December three-year futures were down 11.5 ticks at 93.235, while 10-year futures were down 12.5 ticks at 93.69.
The yield on three-year government bonds climbed to a new seven-year high of 6.83 per cent.
Grange Securities chief economist Stephen Roberts said there was now little domestic
information to drive the Australian dollar until the RBA's interest rate decision next week.
"It's going to be more difficult going for the Australian dollar," Mr Roberts said.
"We haven't got any more data this week to help us and then we're into the Reserve Bank's meeting next week, which is already fairly factored in.
"It will probably do a bit of consolidating at this level if it's going to push any higher."
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In a sign of renewed risk appetite in foreign-exchange markets, the Australian dollar also hit a 16-year high against the lower-yielding Japanese yen.
The currency is expected to build a support base around its current level as it awaits a widely expected Australian rate rise next week.
At 4.45pm Sydney time, the Australian dollar was quoted at US93.12c, up from US92.17c late on Wednesday, but below an intraday high of US93.42c.
The Australian dollar is at the highest it has been since April 1984.
Against the Japanese yen, the Australian dollar was at Y107.29, up from Y105.71, and hit a high of Y107.85 during the session.
The flight of funds to assets like the Australian dollar and equity markets and expectations of a Reserve Bank of Australia 25-basis-point interest rate rise next week weighed on the Australian bond market.
December three-year futures were down 11.5 ticks at 93.235, while 10-year futures were down 12.5 ticks at 93.69.
The yield on three-year government bonds climbed to a new seven-year high of 6.83 per cent.
Grange Securities chief economist Stephen Roberts said there was now little domestic
information to drive the Australian dollar until the RBA's interest rate decision next week.
"It's going to be more difficult going for the Australian dollar," Mr Roberts said.
"We haven't got any more data this week to help us and then we're into the Reserve Bank's meeting next week, which is already fairly factored in.
"It will probably do a bit of consolidating at this level if it's going to push any higher."
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Give Us This Day Our Daily Debt
It was almost 100 years ago that Henry Ford startled the world by giving his workers a raise without being asked. He explained that if they didn't have money they could not buy Ford automobiles.
From then on, his self-evident bit of common sense was accepted decade after decade. But in recent years it got lost and forgotten. The big boys have stopped giving us little folks enough to buy the big boys' stuff.
Get this from the Wall Street Journal: "The wealthiest 1% of Americans earned 21.2% of all income in 2005, according to new data from the Internal Revenue Service. That is up sharply from 19% in 2004, and surpasses the previous high of 20.8% set in 2000, at the peak of the previous bull market in stocks. The bottom 50% earned 12.8% of all income, down from 13.4% in 2004 and a bit less than their 13% share in 2000."
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From then on, his self-evident bit of common sense was accepted decade after decade. But in recent years it got lost and forgotten. The big boys have stopped giving us little folks enough to buy the big boys' stuff.
Get this from the Wall Street Journal: "The wealthiest 1% of Americans earned 21.2% of all income in 2005, according to new data from the Internal Revenue Service. That is up sharply from 19% in 2004, and surpasses the previous high of 20.8% set in 2000, at the peak of the previous bull market in stocks. The bottom 50% earned 12.8% of all income, down from 13.4% in 2004 and a bit less than their 13% share in 2000."
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Wednesday, October 31, 2007
Canadian Dollar Rises to 47-Year High Before U.S. Rate Decision
Canada's dollar rose to the highest since 1960 before the Federal Reserve's interest-rate meeting where economists forecast borrowing costs will be cut to prevent the world's largest economy from falling into a recession.
Canada's dollar rose to $1.0496 at 4:48 p.m. in Toronto, from $1.0482 yesterday. It touched $1.0511, the highest since March 28, 1960. One U.S. dollar buys 95.26 Canadian cents.
The U.S. central bank is expected to cut borrowing costs a quarter-percentage point to 4.5 percent tomorrow, according to interest-rate futures traded on the Chicago Board of Trade. That would eliminate the U.S. benchmark rate advantage over Canada. Bankers' acceptances futures suggest the Bank of Canada will keep the key lending rate unchanged at 4.5 percent this year.
``The market is in a holding pattern before the U.S. rate decision,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto. ``If the Fed's statement is more dovish than the market expects, it will fuel more gains in the Canadian dollar.'' Strauss said the currency may sustain its gains around the $1.05 level by the end of this year.
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Canada's dollar rose to $1.0496 at 4:48 p.m. in Toronto, from $1.0482 yesterday. It touched $1.0511, the highest since March 28, 1960. One U.S. dollar buys 95.26 Canadian cents.
The U.S. central bank is expected to cut borrowing costs a quarter-percentage point to 4.5 percent tomorrow, according to interest-rate futures traded on the Chicago Board of Trade. That would eliminate the U.S. benchmark rate advantage over Canada. Bankers' acceptances futures suggest the Bank of Canada will keep the key lending rate unchanged at 4.5 percent this year.
``The market is in a holding pattern before the U.S. rate decision,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto. ``If the Fed's statement is more dovish than the market expects, it will fuel more gains in the Canadian dollar.'' Strauss said the currency may sustain its gains around the $1.05 level by the end of this year.
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Tuesday, October 30, 2007
Dollar sinks to new low against euro amid expectations of another US rate cut
The dollar descended to new long-term lows Monday against several widely traded counterparts, including the euro and Canadian dollar, as investors pondered the likelihood of a reduction in benchmark U.S. interest rates.
Ahead of the decision Wednesday by the rate-setting Federal Open Market Committee, the greenback stayed mostly range-bound in New York trading, although those ranges were in record-low territory.
The euro hit an all-time high of $1.4439 during the overnight session, while the greenback bottomed out in afternoon trading at C$0.9517 - its lowest level in 37 years.
Sterling traded at three-month highs against the greenback on news that consumer lending in the U.K. shot up to year-high levels, signaling that the recent slew of discouraging U.S. economic reports are primarily of U.S. concern. The pound remained within striking distance of the 26-year highs it reached in July.
The Australian dollar pressed to a fresh 23-year high at 0.9272, mainly on expectations the Reserve Bank of Australia will raise interest rates, said analysts.
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Ahead of the decision Wednesday by the rate-setting Federal Open Market Committee, the greenback stayed mostly range-bound in New York trading, although those ranges were in record-low territory.
The euro hit an all-time high of $1.4439 during the overnight session, while the greenback bottomed out in afternoon trading at C$0.9517 - its lowest level in 37 years.
Sterling traded at three-month highs against the greenback on news that consumer lending in the U.K. shot up to year-high levels, signaling that the recent slew of discouraging U.S. economic reports are primarily of U.S. concern. The pound remained within striking distance of the 26-year highs it reached in July.
The Australian dollar pressed to a fresh 23-year high at 0.9272, mainly on expectations the Reserve Bank of Australia will raise interest rates, said analysts.
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Friday, October 26, 2007
US dollar touches a new euro low
The US dollar tumbled to yet another new low against the euro, as speculation mounted that US interest rates would be cut again next week.
The euro traded as high as $1.4375, breaking the record set last Friday, when one euro bought $1.4319.
The dollar did recover slightly to $1.4369 against the euro bloc currency.
A slew of weak data - including a drop-off in durable goods sales and plummeting demand for new homes - has underlined woes in the US economy.
Rate cut risks
The Federal Reserve is due to meet next week, having last month reduced interest rates from 5.25% to 4.75% in a bid to rejuvenate the economy.
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The euro traded as high as $1.4375, breaking the record set last Friday, when one euro bought $1.4319.
The dollar did recover slightly to $1.4369 against the euro bloc currency.
A slew of weak data - including a drop-off in durable goods sales and plummeting demand for new homes - has underlined woes in the US economy.
Rate cut risks
The Federal Reserve is due to meet next week, having last month reduced interest rates from 5.25% to 4.75% in a bid to rejuvenate the economy.
Read Complete Story
Friday, September 28, 2007
Profit Growth in U.S. May Hit 5-Year Low on Housing (Update1)
Sept. 28 (Bloomberg) -- Profit in the U.S. may grow at the slowest rate in more than five years this quarter as the housing slump hurts results at companies from IndyMac Bancorp Inc. to Target Corp.
Earnings of Standard & Poor's 500 Index members may rise an average of 2.7 percent from a year earlier, breaking a 20- quarter streak of gains exceeding 10 percent, according to data compiled by Bloomberg.
Since Aug. 20, at least 52 financial and consumer discretionary companies in the Standard & Poor's 500 Index have issued third-quarter forecasts that met or fell short of analysts' estimates, compared with 10 that said earnings would be higher than forecast.
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Earnings of Standard & Poor's 500 Index members may rise an average of 2.7 percent from a year earlier, breaking a 20- quarter streak of gains exceeding 10 percent, according to data compiled by Bloomberg.
Since Aug. 20, at least 52 financial and consumer discretionary companies in the Standard & Poor's 500 Index have issued third-quarter forecasts that met or fell short of analysts' estimates, compared with 10 that said earnings would be higher than forecast.
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Thursday, September 27, 2007
Dollar plumbs new depth against the euro
LONDON (AFP) — The dollar plumbed new depths against the euro Thursday but later managed to claw back some lost ground despite fresh signs of US housing market woes.
The single European currency shot to a new record, 1.4189 dollars, for the sixth straight day before slipping back to 1.4134 dollars, against 1.4125 on Wednesday.
The euro recorded its gains before the publication of several US indicators that were seen as mixed at best.
Second quarter economic growth was revised downward from 4.0 percent to 3.8 percent, a still respectable figure that seemed to have little impact on the currency market.
But sales of new US homes were reported to have plunged to their lowest level in seven years in August, when median sale prices dropped by their sharpest in 37 years.
Some 795,000 new homes were sold, down 8.3 percent and lower than initial forecasts for a smaller decline to 825,000.
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The single European currency shot to a new record, 1.4189 dollars, for the sixth straight day before slipping back to 1.4134 dollars, against 1.4125 on Wednesday.
The euro recorded its gains before the publication of several US indicators that were seen as mixed at best.
Second quarter economic growth was revised downward from 4.0 percent to 3.8 percent, a still respectable figure that seemed to have little impact on the currency market.
But sales of new US homes were reported to have plunged to their lowest level in seven years in August, when median sale prices dropped by their sharpest in 37 years.
Some 795,000 new homes were sold, down 8.3 percent and lower than initial forecasts for a smaller decline to 825,000.
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Tuesday, September 25, 2007
Glut of unsold homes rises to 18-year high
U.S. sales of existing homes falling 4.3% to a five-year low seasonally adjusted annual rate of 5.50 million in August, inventories of unsold single-family homes rose to an 18-year high.Meanwhile, a separate gauge of home prices fell for the 12th straight month in July, with prices falling in 15 of 20 major cities over the past year. Prices in 10 major cities are falling at the fastest pace in 16 years. Consumers are getting more worried about the economy. The consumer confidence index fell sharply for a second straight month, hitting depths not seen since Hurricane Katrina struck two years ago, the Conference Board reported in yet another report. See full story.
Bond traders tip a US slowdown
Traders in government bonds, who predicted six of the last seven recessions, say America's Federal Reserve will lower interest rates again before the end of the year as the US economy comes to a standstill.
Since the Fed last week lopped half a percentage point off the central bank's target for overnight lending between banks - the first orchestrated decline in so-called federal funds rate since 2003 - traders have pushed the yield on Treasury two-year notes to almost three quarters of a point below the designated 4.75 per cent funds rate. In the three previous occasions during the past 20 years when that has happened, policymakers have cut borrowing costs.
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Since the Fed last week lopped half a percentage point off the central bank's target for overnight lending between banks - the first orchestrated decline in so-called federal funds rate since 2003 - traders have pushed the yield on Treasury two-year notes to almost three quarters of a point below the designated 4.75 per cent funds rate. In the three previous occasions during the past 20 years when that has happened, policymakers have cut borrowing costs.
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