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Thread: Dollar plunges to fresh lows

  1. #1

    Dollar plunges to fresh lows

    [QUOTE]By Stephen Foley
    Published: 11 July 2007
    The dollar has plunged to its lowest level ever against the euro amid evidence that the American housing market slowdown may be leaching into other areas of the economy.

    And sterling also hit a fresh 26-year high against the US currency, with £1 at one point buying close to $2.03.

    The dollar's decline came amid warnings of worsening conditions in the housing market. The rating agency Standard & Poor's predicted more defaults among low-income borrowers who have taken out so-called "sub-prime" mortgages, while the biggest home improvement chain, Home Depot, issued its second profit warning in two months.

    The number of homes being built in the US is at a 10-year low and tumbling prices in many parts of the country have discouraged people from moving. "We look at the overall market and say there's still a correction that lies ahead of us," Home Depot's chief executive Frank Blake said, adding that he expected "continued headwinds through 2007 and probably some into 2008 as well".

    S&P warned it may downgrade the creditworthiness rating of $12bn (£5.9bn) of bonds backed by sub-prime mortgages, and of other credit investments which are in turn backed by those bonds. Those other investments, known as collateralised debt obligations (CDOs), are widely held by hedge funds and other investors across the US financial system. Also yesterday, Moody's downgraded $1.6bn of sub-prime mortgage-backed securities.

    US house prices will drop by 8 per cent between 2006 and 2008, S&P predicted, exceeding the record peak-to-trough drop of 6.5 per cent between 1991 and 1992, making investments backed by sub-prime loans issued in 2006 particularly vulnerable.

    The fallout from rising sub-prime mortgage defaults is therefore widening, and foreign investors continued to withdraw from related financial markets yesterday, adding to the downward pressure on the dollar. David Solin, a partner at Foreign Exchange Analytics Investors, said investors should expect less foreign investment from now on because of a "global rethink of the credit quality of buying highly leveraged, high-yielding debt instruments".

    By the close in the US, the euro was trading at $1.374, up just over a cent. The pound closed at $2.027, up 1.2 cents.

    Stocks were also hit, with the Dow Jones shedding just over 1 per cent to 13,501.7.

    The US economy has decelerated sharply this year, as weak housing markets and high petrol prices have undermined consumer spending power. Meanwhile, growth in the UK and eurozone has shot ahead and interest rate rises have been needed to keep inflation under control. The eurozone economy is expanding at its fastest pace for six years.

    Gregory Salvaggio, a vice-president for trading at Tempus Consulting in Washington, said there was a stark contrast with the situation in the US, where inflationary pressures are tempered by the weakness of the housing market, so that the Federal Reserve is holding rates steady. "The ECB is going to hike rates at least two times more this year and US bond yields are falling, giving no incentive for large global investors to hold dollars," he said.

    Traders had been nervous before a lunchtime speech by Ben Bernanke, the chairman of the Federal Reserve, to the National Bureau of Economic Research, in which he was due to talk about inflation. Any suggestion the Fed might view price pressures as rising would have lifted interest rate expectations and given the stock market a jolt, but would have supported the dollar. In the end, a more doveish tone left traders free to keep selling the dollar. [/QUOTE]

    [url]http://news.independent.co.uk/business/news/article2753423.ece[/url]

  2. #2
    Its amazing that Bush and the MSM can still continue to talk about how great the economy is doing when this is happening...unbelievable.

  3. #3
    The only people who can't find work today are the proud and the imprisoned. End of discussion.

  4. #4
    [QUOTE=sackdance]The only people who can't find work today are the proud and the imprisoned. End of discussion.[/QUOTE]

    Too bad many cannot go to England as the pound is over $2.00 USD and we always forget about the deficit.

    Also: [QUOTE][I]The dollar's decline came amid warnings of worsening conditions in the housing market. The rating agency Standard & Poor's predicted more defaults among low-income borrowers who have taken out so-called "sub-prime" mortgages, while the biggest home improvement chain, Home Depot, issued its second profit warning in two months.

    The number of homes being built in the US is at a 10-year low and tumbling prices in many parts of the country have discouraged people from moving. "We look at the overall market and say there's still a correction that lies ahead of us," Home Depot's chief executive Frank Blake said, adding that he expected "continued headwinds through 2007 and probably some into 2008 as well".[/[/I]QUOTE]

    I know, Blame Clinton

  5. #5
    Jetdawgg - you show snapshots of certain markets in deceleration or correction and tell us that we're in the ****ter. People don't need to read an article to know when the economy sucks. Both Clinton and Bush should be credited for keeping the US a great place to make a buck. I suggest you move to Europe, someone (a communist newsletter, perhaps?) might have use for your macroeconomic insights.

  6. #6
    [QUOTE=sackdance]Jetdawgg - you show snapshots of certain markets in deceleration or correction and tell us that we're in the ****ter. People don't need to read an article to know when the economy sucks. Both Clinton and Bush should be credited for keeping the US a great place to make a buck. I suggest you move to Europe, someone (a communist newsletter, perhaps?) might have use for your macroeconomic insights.[/QUOTE]

    I suppose that the people that have to deal with those 'corrections' are just stats?

  7. #7
    Jets Insider VIP
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    [QUOTE=sackdance]The only people who can't find work today are the proud and the imprisoned. End of discussion.[/QUOTE]


    and the lazy asses, er the entitled....

  8. #8
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    [QUOTE=Jetdawgg]Too bad many cannot go to England as the pound is over $2.00 USD and we always forget about the deficit.

    [/QUOTE]
    Then go to South America- dollar buys alot there, and I hear Buenos Aires is very nice.

  9. #9
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    [QUOTE=HDCentStOhio]Then go to South America- dollar buys alot there, and I hear Buenos Aires is very nice.[/QUOTE]

    actually chavez has done wonderful things in caracass....just ask the people.

  10. #10
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    [QUOTE=Come Back to NY]actually chavez has done wonderful things in caracass....just ask the people.[/QUOTE]
    I hear he is a great leader, too!

  11. #11
    [url]www.bloomberg.com/apps/news?pid=20601087&sid=agqmytKZc24c&refer=home[/url]

    [QUOTE]U.S. Stocks Rally; S&P 500, Dow Surge to Records as Alcoa Soars
    By Eric Martin


    Alcoa manufacturing plant, Modena, Italy
    July 12 (Bloomberg) -- Stocks rallied, sending benchmark indexes to records and the Dow Jones Industrial Average to its biggest gain since 2003, after Wal-Mart Stores Inc.'s sales and a surge in exports improved prospects for economic growth.

    Energy, industrial and commodities producers' shares all climbed to all-time highs. Target Corp. hit a peak on speculation activist investor William Ackman took a stake in the second-largest U.S. discount retailer. Aluminum maker Alcoa Inc. led the Dow's 283-point gain, after Rio Tinto Group's plan to buy Alcan Inc. spurred expectations of more takeovers.

    Better-than-forecast June sales at Wal-Mart, J.C. Penney Co. and Costco Wholesale Corp. eased concern the housing slump and higher energy prices will cripple consumer spending, which accounts for more than two-thirds of the U.S. economy. Economists raised forecasts for second-quarter growth after a government report showed exports rose to a record in May.

    ``The general feeling today is that we had surprisingly good reports on retail sales and the big daddy of them all, Wal-Mart, beat estimates,'' said John Wilson, co-director of equity strategy at Morgan Keegan & Co., which oversees $20 billion in Memphis, Tennessee. ``Things look very positive.''

    The S&P 500 added 28.94, or 1.9 percent, to 1547.70. The Dow average advanced 283.86, or 2.1 percent, to 13,861.73. Both climbed above their records on June 4. The Nasdaq Composite Index increased 49.94, or 1.9 percent, to 2701.73. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. stocks, also posted a record, surging 270.21, or 1.8 percent, to 15,652.94.

    Broad Rally

    All 10 industries groups in the S&P 500 and all 30 companies in the Dow rose.

    European stocks gained for the first time in three days after Rio Tinto's bid. The Stoxx 600 Index rallied 1.2 percent to 397.34.

    Wal-Mart advanced $1.15, or 2.4 percent, to $48.83. June sales at U.S. stores open at least a year grew 2.4 percent, exceeding the company's forecast of 2 percent or less and the 0.8 percent projected by analysts.

    Target jumped $4.44, or 6.8 percent, to $70.04. Ackman has accumulated a stake of more than 5 percent, a person with direct knowledge of his purchase said.

    `Perfect Storm'

    ``When you see someone taking a financial position in a retailer the size of Target, it makes you say `What other deals are possible with the amount of money that's out there?''' said Art Hogan, the Boston-based chief market analyst at Jefferies & Co. ``We had the perfect storm of good news in a relatively volatile market.''

    Costco added $1.02 to $61.74 after the largest U.S. warehouse club said June same-store sales increased 6 percent, exceeding the estimate of 5.9 percent.

    Abercrombie & Fitch Co. gained $5.70, or 8.2 percent, to $75.08, the steepest jump in the S&P 500. The clothing retailer for teens and college students said June comparable store sales rose 2 percent from a year earlier. Analysts had estimated sales to fall 2.8 percent.

    J.C. Penney climbed $4.30 to $75.46. Its 1.5 percent drop in same-store sales was smaller than the estimate for a 3.1 percent decline.

    Alcoa Speculation

    Alcoa rallied $2.86, or 6.7 percent, to $45.29 after Rio Tinto Group, the world's third-largest mining company, agreed to buy Alcan for $101 a share, a 13 percent premium to yesterday's closing price, the London-based company said today in a statement. The offer is 33 percent higher than Alcoa's bid of $76 a share.

    BHP Billiton Ltd. will attempt to buy Alcoa ``in a relatively short space of time,'' said John Meyer, a director of mining-equity sales at Numis Securities in London.

    Alcoa withdrew its unsolicited bid for Alcan after the close of U.S. exchanges.

    Exxon Mobil Corp., the world's biggest energy producer, also helped lift the Dow average, climbing $2.33 to a record $89.62 and pushing the company's market value to almost $504.9 billion.

    Stocks also got a boost when forecasts for second-quarter economic growth were raised after the Commerce Department said the U.S. trade deficit in May increased 2.3 percent to $60 billion from $58.7 billion in April. Most of the jump was caused by higher costs for imported oil. U.S. exports climbed to a record $132 billion.

    Chipmakers Surge

    Intel Corp. added $1.43 to $26. Banc of America Securities LLC boosted its stock-price forecast and earnings estimates for the world's biggest maker of semiconductors on ``solid'' demand for its processors. Intel is also expected to report second- quarter sales at the high-end of the company's own forecast, according to analyst Sumit Dhanda.

    Advanced Micro Devices Inc. gained 71 cents to $15.36. UBS AG analyst Uche Orji lifted his second-quarter estimates for the second-biggest chipmaker on expectations of ``solid'' demand for PCs. The analyst raised his second-quarter revenue estimate by $22 million to $1.27 billion and trimmed his loss forecast by a cent to 83 cents a share.

    Discover Financial Services rose $1.13 to $26.34. Lehman Brothers Holdings Inc. initiated coverage of the fourth-biggest U.S. credit-card network with an ``overweight'' rating and a $28 share-price forecast.

    Analyst Bruce W. Harting wrote the company will return money to shareholders through dividends and buybacks and will be more aggressive as an independent company. Discover was spun off from Morgan Stanley at the beginning of the month.

    M&T Bank Corp. gained $4.01 to $111.74. The New York lender partly owned by Warren Buffett's Berkshire Hathaway Inc. posted second-quarter earnings that beat analysts' estimates as higher fee income overcame weakness in mortgage banking.

    Financials Gain

    A gauge of financial shares in the S&P 500 climbed 2.2 percent, rebounding from a July 10 sell-off that was spurred by concern the housing recession would hamper earnings.

    More than seven stocks rose for every one that fell on the New York Stock Exchange. Some 1.7 billion shares changed hands on the Big Board, 6.6 percent more than the three-month daily average.

    Progressive Corp. fell 71 cents to $22.69. The third- largest U.S. car insurer said second-quarter earnings fell 29 percent on higher claim costs and lower prices. The company's profit margin in June was the smallest since Hurricane Katrina struck in 2005.

    ImClone Drops

    ImClone Systems Inc. fell $1.17 to $34.73. The company's drug Erbitux failed to slow tumor growth in lung cancer patients, a study found, a setback for ImClone's plan to expand the market for its only product.

    The Russell 2000 Index, a benchmark for companies with a median market value of $700 million, gained 1.8 percent to 855.18.

    In other economic reports, jobless claims decreased by 12,000 to 308,000 in the week that ended July 7, the Labor Department said. The four-week moving average, a less volatile measure, dropped to 317,750 from 319,250. Economists in a survey had forecast 315,000.

    The yield on benchmark 10-year Treasury notes rose more than 4 basis points, or 0.04 percentage point, to 5.13 percent. Crude oil for August delivery fell 6 cents to $72.50 a barrel in New York.

    To contact the reporter on this story: Eric Martin in New York at [email]emartin21@bloomberg.net[/email][/QUOTE]

  12. #12
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    [QUOTE=HDCentStOhio]I hear he is a great leader, too![/QUOTE]


    I think you got some of "it" in your hair....

  13. #13
    [QUOTE=Jetdawgg]Too bad many cannot go to England as the pound is over $2.00 USD and we always forget about the deficit.

    Also: [QUOTE][I]The dollar's decline came amid warnings of worsening conditions in the housing market. The rating agency Standard & Poor's predicted more defaults among low-income borrowers who have taken out so-called "sub-prime" mortgages, while the biggest home improvement chain, Home Depot, issued its second profit warning in two months.

    The number of homes being built in the US is at a 10-year low and tumbling prices in many parts of the country have discouraged people from moving. "We look at the overall market and say there's still a correction that lies ahead of us," Home Depot's chief executive Frank Blake said, adding that he expected "continued headwinds through 2007 and probably some into 2008 as well".[/[/I]QUOTE]

    I know, Blame Clinton[/QUOTE]I'm concerned with our gov't spending, but our purchasing power in other nations should not be a top priority.

  14. #14
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    [QUOTE=Jetdawgg]I suppose that the people that have to deal with those 'corrections' are just stats?[/QUOTE]

    First, you are wrong to assume that there is any concrete correlation between the strength of currency and future economic performance...it is not a reliable predictor either way.

    Here is another perspective:

    [URL=http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article2062059.ece]Puny Dollar[/URL]

    [QUOTE]To the extent that any relationship has existed between currencies and economic performance, it has usually been the “wrong” way round – rising currencies usually preceded periods of economic decline, while weakening currencies have presaged economic strength. Think, for example, of the collapse of sterling in 1992, which ushered in the strongest and longest period of economic expansion in British history.

    Or consider the strength of the US economy in the late 1990s, just after the dollar fell to its previous nadir in 1995. Even more spectacular has been the decade of growth in China since its currency collapsed to a record low in the Asian crisis of 1997. On the other side of the ledger, there has been Japan’s stagnation after 1995, when the yen hit a record high, and Germany’s lost decade after the surge in the mark that followed German reunification and the eurozone’s dismal economic performance from 2003 to 2005, as the newly created euro appreciated by 60 per cent against the dollar.

    There are many explanations for the apparently perverse relationship between currencies and economic performance, though none of them is watertight. For example, currencies tend to strengthen in response to rising interest rates and fears of inflation – which are obviously bad for economic performance – but also in response to strong economic growth.

    On the other hand, a currency may weaken because inflation prospects are improving, as they are in the US at present, or because investors fear a financial collapse, which some believe to be a looming in the US mortgage market. But if the causes of currency strength are ambiguous and contradictory, the consequences are clear. A currency that keeps rising, as the euro and sterling are at present, will eventually do serious damage to almost any economy, hurting export competitiveness and stunting growth.

    [/QUOTE]

    and:[QUOTE]Americans, meanwhile, will enjoy the benefits of a super-cheap currency, which will more than offset falling property prices and problems with a small minority of mortgage loans. American politicians, for all their faults, instinctively understand this, which is why they have generally welcomed a falling dollar and have been pressuring China and Japan to let the dollar weaken against the yen and the renmimbi – not just, as at present, against the euro and the pound. [/QUOTE]

  15. #15
    [QUOTE=Jetdawgg]I suppose that the people that have to deal with those 'corrections' are just stats?[/QUOTE]
    The news you highlight, Jetdawgg, adversely effects house flippers more than anyone else. It's a correction in a real estate market, one that's been enjoyed a historic bull run in the past 15 some-odd years. I hate to destroy your fantasy, but there won't be anymore souplines than there was last month or last year. I've never seen someone so attached to rooting for bad news than you.

  16. #16
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    [QUOTE=jefethegreat]Its amazing that Bush and the MSM can still continue to talk about how great the economy is doing when this is happening...unbelievable.[/QUOTE]

    How the dollar is doing against other currencies is not a good indicator on judging the economy. In fact the US is welcoming the Euro getting strong. Does this suck for the average traveler? Of course. But the US as a whole benefits when the euro gets strong because people in Europe will buy more American products because they are cheaper. US also benefits from tourism because Europeans now see the US as a cheap vacation. I recently read an article that says that there will be record visitors from the UK and Germany to the US this year.

    Its the same as it is here, just with China. China has seen huge growth in their economy (10% a year), yet the exchange rate is 1 dollar to 8 yuan. China purposely has it pegged that high so that goods remain really cheap in the US and the rest of the world. If it were to drop to say 4 to 1, everything would cost twice as much to produce and US consumers would buy products from a country that could make them for less.

    So a weak dollar sucks for travelers, but there is a net gain for the US.

  17. #17
    [QUOTE=Mario]How the dollar is doing against other currencies is not a good indicator on judging the economy. In fact the US is welcoming the Euro getting strong. Does this suck for the average traveler? Of course. But the US as a whole benefits when the euro gets strong because people in Europe will buy more American products because they are cheaper. US also benefits from tourism because Europeans now see the US as a cheap vacation. I recently read an article that says that there will be record visitors from the UK and Germany to the US this year.

    Its the same as it is here, just with China. China has seen huge growth in their economy (10% a year), yet the exchange rate is 1 dollar to 8 yuan. China purposely has it pegged that high so that goods remain really cheap in the US and the rest of the world. If it were to drop to say 4 to 1, everything would cost twice as much to produce and US consumers would buy products from a country that could make them for less.

    So a weak dollar sucks for travelers, but there is a net gain for the US.[/QUOTE]

    Thanks to TSA the airports are a drag for travelers. The industry is starting to hurt again. I did notice in SC that there were a lot of Germans, Russians and French travelers there last month

  18. #18
    [QUOTE=Winstonbiggs][url]www.bloomberg.com/apps/news?pid=20601087&sid=agqmytKZc24c&refer=home[/url][/QUOTE]

    NAS up 13% this year too.

  19. #19
    [QUOTE=Greenwave81]First, you are wrong to assume that there is any concrete correlation between the strength of currency and future economic performance...it is not a reliable predictor either way.

    Here is another perspective:

    [URL=http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article2062059.ece]Puny Dollar[/URL]



    and:[/QUOTE]

    [I]a small minority of mortgage loans[/I]

    Isn't Bear Stearns having some issues due to this?

  20. #20
    [QUOTE=Mario]How the dollar is doing against other currencies is not a good indicator on judging the economy. In fact the US is welcoming the Euro getting strong. Does this suck for the average traveler? Of course. But the US as a whole benefits when the euro gets strong because people in Europe will buy more American products because they are cheaper. US also benefits from tourism because Europeans now see the US as a cheap vacation. I recently read an article that says that there will be record visitors from the UK and Germany to the US this year.

    Its the same as it is here, just with China. China has seen huge growth in their economy (10% a year), yet the exchange rate is 1 dollar to 8 yuan. China purposely has it pegged that high so that goods remain really cheap in the US and the rest of the world. If it were to drop to say 4 to 1, everything would cost twice as much to produce and US consumers would buy products from a country that could make them for less.

    [B]So a weak dollar sucks for travelers[/B], but there is a net gain for the US.[/QUOTE]

    Yes. I agree. I am a traveler to foreign nations

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