Community | December 01, 2008 | 10 comments

As European econonmies suffer, the dollar gains on the euro and the pound

source: http://money.cnn.com/2008/12/01/markets/dollar/index.htm

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InformedTexan
NEW YORK (CNNMoney.com) -- The dollar gained against the euro and the British pound Monday after a slew of dismal economic reports and official word that the U.S. economy has been in a recession since December 2007.

In times of uncertainty, investors flock to perceived safe havens like the U.S. dollar and U.S. Treasurys.

"The U.S. dollar is firming up because in a high level of risk aversion, U.S. Treasurys are the investment of choice rather than global equities," said Gareth Sylvester, senior currency strategist at HiFX in San Francisco.

The dollar gained against the 15-nation euro, which fell to $1.2646 from $1.2712 late Friday. The dollar also gained against the British pound, which slid to $1.4884 Monday from $1.5365.

"What we are seeing on a daily, weekly basis is the reallocation of wealth," said Sylvester. "If you are pessimistic on the global economy, then you are putting money in U.S. Treasurys." And Treasurys are bought in dollar denominations, giving the greenback further support.

Euro, U.K. economies droop: Several purchasing reports released Monday showed further economic sluggishness in the region.

As economies around the globe weaken, the possibility of further interest rate cuts by central banks around the world is heightening. The European Central Bank and the Bank of England are both set to announce their monetary policy decisions later in the week, and both banks are expected to slash rates.

"The euro and United Kingdom monetary authorities are catching up to the rate reductions that the Federal Reserve made earlier this year," said Tom Benfer, director of foreign exchange at BMO Capital Markets.

The Fed has been aggressively cutting rates, whereas overseas central banks have been "slow to react," said Benfer. "And now they are reacting very fast and suddenly."

Japanese yen: Meanwhile, the dollar lost ground against the Japanese yen, which bought ¥93.212 Monday, down from ¥95.482.

The yen had been gaining strength as investors shifted assets from high-yielding currencies such as the euro and the pound into what is perceived as a safer haven.

The yen was also getting a boost from the reversal of the carry trade, which is when investors borrow yen to fund investments in higher-yielding currencies. But when those currencies weaken, and investors reverse their positions, they are forced to buy back the yen, thereby raising its value.
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10 comments // As European econonmies suffer, the dollar gains on the euro and the pound

  • barbara3d
    • 0
      barbara3d  

    • Well the bottom line is this: "They" wont "say" until the numbers and stars allign for a full year.Lest they be wrong and lose their cushy government job. I just bet, no matter how bad it gets, they will ALL keep their jobs. I am talking about "City workers, State and Federal". I used to work for the "State" but I left to go to Nursing School before I became completely brain dead due to the Mass lack of interest other than time off.

      I used the "R" word many times over the past year...I am moving on to the "D" word after the stock losses have hit bottom again.

    • 3 years ago
  • AveryMoore
    • 0
      AveryMoore  

    • ".....after official word that the U.S. economy has been in a recession since December 2007."

      Right. OK then. Ah, anyone have a problem with this late-breaking revelation? For a year the words downturn, slowdown, meltdown and cataclyism, and many others like it, were tossed around and denied in Very Heated And Defiant Tones. No way are we economic sissies or failures!

      But now the fib can be admitted (Monty Python-like) "Recession? Are we in a Recession? NO! Oh wait, sorry! We are. For at least a year. Longer probably. No reason to tell you. Hoped no one was paying attention actually. But they do. Nosy gits!"

      Having tanked the economy, what's left is our holiest token, the dollar - evaluated entirely on the fiction that our economic future is stable but not rosy. This paper promissory note - is going up against more stable and progressive currencies and beating them?

      So the latest bubble is the buck? That will be very good for imports, inflation, and more job losses, won't it?

    • 3 years ago
  • Katmai512
  • AveryMoore
  • AveryMoore
  • iameam
  • AveryMoore
    • 0
      AveryMoore  
    • AveryMoore:

      My point? Ah yes, that...

      Several. Doubtless we're being lied to. If this shitstorm plays out the way the Great Depression did, (so far it has) then we'll all be on a rollercoaster for some time. Things will appear to have returned to normal followed for no apparent reason by another plunge.

      Thanks to a fabulously uninformative public communications system (which can communicate propaganda brilliantly but straight facts are strictly off limits) we'll have no idea what's on the way. The politicians and their insiders will be far better informed and say zip, not wanting to spead a panic...

      What we've see thus far is that Washington is doing its utmost NOT to address the problems, but merely mask the symptoms.

      An anecdotal case in point. [possibly true]

      Speaking to the Minister Of Finance Marie Antoinette asks -

      "But then what can be done to save the Franc!"

      Her Minister bows and says -

      "Nothing, Madame! The situation is for too SERIOUS!"

    • 3 years ago
  • iameam
    • 0
      iameam  
    • AveryMoore:

      There are so many different levels that I could reply...

      But I'll try...

      You know... I've listened to Peter Schiff speak a little bit, and he's the one who really helped me to understand that... an economy that is predominantly based on consumerism, and less and less manufacturing/ production, can not sustain it self. It makes perfect sense. In this way, the system that we are currently living in has to crash, and our standard of living has to drop. The American Dream is just that... a dream.

      Now it's time to wake up.

      It's a world that's out of balance. It's a world where there is too much emphasis on material and monetary gain which in turn is breeding and fostering corruption. This is the current human condition... and it must change... it will change. It's changing before our eyes... right now.

      Nature, (humans included), has a way of balancing itself out.

      It's crazy! We know that we are intelligent enough to take care of everyone on the planet, making sure that everyone has food, water and shelter. But yet there are people starving in the world, there are people without homes, and now... even water is an issue for many. We're intelligent enough to know how to manage our resources without raping and destroying the planet. But yet... we continue to do so.

      What or who is inhibiting us from making this necessary and inevitable shift? Is it the government, the corporations, the power elite? Yes...

      But really, if we look deeper, we can see that it's really... the human condition. It's an old way of being. This old clunky "me me me" mentality just doesn't work any more. It can't work any more. It's not sustainable. Our survival as a species is in obvious jeopardy. But somehow we don't see this clearly.

      Many people think that 2012 prophecies are bullshit, or crazy. Many people have created these elaborate stories building upon the 2012 prophecies. And... I don't know what is true about 2012.

      But I do know how I feel. I do know what I see.

      This world... this human world that we can see and follow more clearly, thanks to the internet... is mad. It's fucking insane. Humans are killing each other for what? Humans are allowing other humans to starve? For what?

      You know... Zeigeist Addendum, while it may not be perfect, is an excellent film. It's really touching on something. Again... it may not be perfect. But it is worth watching.

      Too much...

      Avery thanks for this dialogue. Please respond.

    • 3 years ago
  • AveryMoore
    • 0
      AveryMoore  
    • AveryMoore:

      iameam,

      To rework an analogy, and to put it even more simply someone - can't remember who - claimed that the wall street boys stopped betting on tangibles [real assets to support the nation's growth and stability] but started gambling - on GAMBLING!

      Bankers went into the same psychosis. Forget requiring anything as tangible as collateral! If that caterpillar beats that other caterpillar to that green leaf - I win! Gimme odds?

      The economy [from my own experience this goes back 30 years] simply disconnected from any coherent feedback from the natural world and at the top ranks took on the insane perspectives of a cadre of whacko race track systems-junkies.

      Money that would have been more economically coherent if spent on the long term development of humanly useful enterprises went into short term gambles on long shots. Industries? Jobs? We sold them to other countries! Sane? Not even close.

      When the gambles paid off - some did handsomely (and briefly for very few) - the game-player was hooked for good. Worse, for those who didn't win, fear, humiliation, their envy of others, and the hope of recovering everything lost, kept them going back.

      As in the gambling addict's family life - while mom or dad was paying off the bookie and scrounging more for the next day's fantasy jackpot - in the meantime nothing was invested in the family.

      If you look around today and survey how little was accomplished across the broad spectrum of national political and economic life (in 8 years of unparalleled and unprincipled larceny and greed) we are that family.

    • 3 years ago
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