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The dollar has plunged to its lowest level against the euro since April 2005 amid concerns for the US economy.
The euro surged to $1.30 against the dollar, with many other currencies following suit.
Sterling rose almost 1% to $1.93, the yen hit a two-month high and Russia's rouble rose to a seven-year high.
Analysts have voiced concerns about the US economy after the White House downgraded its growth forecasts amid a sharp slowdown in the housing market.
Nov. 22 (Bloomberg) -- The dollar fell to a five-month low versus the euro and tumbled against the yen as a report showing an increase in jobless claims suggested the economy is cooling.
Dollar losses accelerated as a government report showed more workers filing for unemployment benefits during the past week.
BEIJING: Countries holding large stockpiles of foreign exchange reserves face problems diversifying their holdings away from dollar-denominated assets because of the potential market reaction to any such move, a senior Chinese forex official said on Saturday.
Guan Tao, deputy director-general of the general affairs department of the State Administration of Foreign Exchange (SAFE), highlighted the potential pitfalls of such a move, without specifically referring to China or its plans for managing its reserves.
“It is very difficult for these countries to make significant adjustments in their reserve asset portfolios,” Guan told a forum, adding that that was his personal view and not a statement of SAFE policy.
“As we all know, every move by these countries in the market is under the spotlight once you say ‘forex reserve currency diversification’, regardless of whether you’re talking about the past or the present, there will definitely be market reaction,” he said.
A growing chorus of Chinese government economists has begun calling for Beijing to shift some of the country’s reserves, the world’s largest at more than $1 trillion, away from dollar assets and into other currencies or strategic resources such as oil.
The composition of the reserves is a state secret, but bankers and academics assume that at least two-thirds is invested in dollars, mainly US government debt.
The role of the United States in world trade meant that it and major holders of foreign exchange had formed a mutually dependent relationship, said Guan.
“The US buys cargo, and countries with a trade surplus buy US treasuries they actually have no other choice,” he said.
“If I have a surplus on the trade account, if I have foreign exchange income, I can certainly invest part of it in non-dollar assets, but the size of the market for non-dollar assets is very limited so the great majority of foreign exchange reserve assets has to be invested US financial markets.”
SINGAPORE (Reuters) - Gold hit its highest level in more than three months above $648 an ounce on Friday before losing some of its gains to profit taking, but a weaker dollar would offer support for the precious metal.
"I don't think we will cross $730 again this year, but I dare say the new year will bring a new high for gold," said a dealer in Singapore.
"If the Fed cuts the interest rate now, you will see the dollar collapsing," he said.
Originally posted by Mdv2
Meanwhile the Euro continues to appreciate agains the Dollar, which is disadvantageous for both the European Union and the US.
Originally posted by Seekerof
The 'disadvantage' is inherently more AGAINST the European Union than the US.
The US economy continues to be strong despite the ailing dollar, something which you did not mention, and the majority of European Union countries economies continue to decline or get no better as the Euro "appreciates," something which you did not mention.
Originally posted by Seekerof
in France and Germany are STILL at historical levels; recession since October 2002.
Germany's economy is booming and unemployment is dropping steadily.
BRUSSELS, Belgium — The jobless rate in the 12 nations that use the euro hit a new low Friday, falling slightly to 7.7 percent as the economy picks up steam
Originally posted by Seekerof
9.6% unemployment is definately something to be bragging about, huh? Need I say more?
Originally posted by Mdv2
Enjoy your American dream now you still can, soon enough the situation will change... China and Japan have the power to make or break the US.
Mint bans melting coins now worth more as liquid than loot
December 14, 2006
WASHINGTON -- Given rising metal prices, the pennies and nickels in your pocket are worth more melted down than their face value -- and that has the government worried.
U.S. Mint officials said Wednesday they were putting into place rules prohibiting the melting down of 1-cent and 5-cent coins, with a penalty of up to five years in prison and a fine of up to $10,000 for people convicted of violating the rule.
Because of the prevailing prices of metals, the cost of producing pennies and nickels exceeds the coins' face value.
The nations of the Organization of Petroleum Exporting Countries are selling U.S. Treasuries at the quickest pace in more than three years, according to U.S. Treasury Department data. Concerned analysts predict a dollar sell-off coupled with rising interest rates.
In the three months ending in November 2006, oil-exporting nations including Indonesia, Saudi Arabia and Venezuela sold 9.4 percent of their U.S. government debt—a significant amount, considering these countries own more than $100 billion worth.
Over the past few years, oil producers have become very important dollar supporters, rivaling the United Kingdom, and even China and Japan.
Jan. 24 (Bloomberg) -- Kuwait, the third-largest Arab oil producer, may abandon the dinar's peg against the dollar in favor of a basket of currencies to help minimize economic harm after the dollar declined.
``We might go to a basket for an interim period,'' Bader al- Humaidhi, Kuwait's finance minister, told reporters today at the World Economic Forum in Davos, Switzerland. ``The dollar fell a lot against the euro last year, but if we'd been linked to a basket we wouldn't have suffered'' as much.
Dollar reserves are being replaced with euros by oil producers including the United Arab Emirates and Venezuela. China, which has the world's largest foreign-exchange reserves, and Indonesia say they plan to increase euro reserves and Iran says it's boosting oil sales priced in euros.
Conservative economist Bruce Bartlett accused President Bush of "bankrupting" America and betraying the Reagan legacy in an interview on PBS's Tavis Smiley Show on Tuesday.
A domestic policy adviser to President Ronald Reagan and a treasury official under President George H.W. Bush, Bartlett assailed Bush's "big government conservatism" and said he was surprised at Bush's policies, despite his campaign pledge to be a "compassionate conservative."
"In 2000 I thought that was election year rhetoric," said Bartlett. "I didn't think it meant anything. I learned the hard way as a lot of us did what he really meant it when he talked about compassionate conservatism."
When asked how the current President Bush compared to his father, Bartlett responded, "If I didn't know with a certainty they were related, I wouldn't think that they were."
Bartlett also argued that current conservative fiscal rhetoric regarding supply-side economics is outdated. "We have a completely different economic situation, completely different fiscal and tax situation and I think people are still using rhetoric that was appropriate at one time for a situation that in which it is no longer appropriate."
Bartlett was also not optimistic about the remainer of Bush's term.
"I think we are on automatic pilot," said Bartlett. "Very few administrations do much of anything the last year and a half in office. I think the best thing we can hope for is a new president who will take America in a different direction."
FRANKFURT, Germany: The euro climbed to an all-time high against the dollar Friday as weak U.S. growth figures reinforced fears of a widening economic disparity between Europe and the United States.
The surge will not be kind to Americans visiting Europe this summer, who will feel like they are paying more for hotel rooms in Rome, entrance fees at the Louvre and chocolates in Belgium.
The euro hit US$1.3682, shooting past its previous high of US$1.3667 from December 2004, after the U.S. Commerce Department reported that economic growth slowed to a 1.3 percent annual rate in the first quarter, its weakest performance in four years.
The 13-nation currency then settled back to US$1.3655 in late European trading, still up from its US$1.3601 level in New York late Thursday.
The US deficit could be sustained indefinitely if foreigners are indefinitely willing to buy US assets.
Some argue that this is possible because the US financial system is always creating attractive new assets with potential for capital growth.
But that seems implausible. In any case, foreigners are not looking for equity or direct investments, as they did in the late 1990s, but for bonds.
The International Monetary Fund recently reported that 80 per cent of the deficit is financed by foreign purchases of bonds, and that investors were increasingly willing to dump those bonds in favour of non-US assets in response to interest rate and exchange rate fluctuations.
All this means that an abrupt dollar collapse still cannot be ruled out.