Thursday, March 13, 2008

Bush Explains Descent of Dollar As ‘Adjusting’

by Rohan Parker

U.S. President George W. Bush has tried to explain away the current downward spiral of the U.S. dollar - which is at it’s lowest point against the Japanese Yen since 1995 - as the dollar just ‘adjusting’.

Bush also stated that the current record low against the euro was not ‘good tidings’ for champions of a robust dollar. The U.S. dollar is also trading at record lows against the Swiss franc; all of which is due to less expendable cash because of soaring oil prices, according to analysts.

The comments made by Bush have been disparaged by research director of Forex.com, Brian Dolan, who went on to say that many people may construe his comments about the dollar ‘adjusting’ to be an implied acceptance of an across-the-board dollar devaluation.

Yesterday saw the dollar perform its worst against the Euro since the release of the neo-European currency in 1999; at $1.5535 in the morning to closing at $1.5551. Against the Yen the dollar is even worse, trading for part of yesterday at the lowest rate since 1995, 101.10, though it did struggle back up to 101.49 at the close.

News isn’t good against the Swiss Francs either, with the dollar trading at 1.0158 at the close, though it went so low as 1.0128 during the day. The dollar against the pound is running along fairly normally, trading at $2.0267.

In spite of derision aimed at the ‘adjustment’ comment, Bush repeated it in an interview with U.S. Public Broadcasting Service which is to be aired today. He stated that the country had a dollar that was adjusting, and he advocated he would like a strong dollar.

Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney, stated that the dollar is in serious trouble, especially with no strong resistance level against the euro and that there is no probable level at which it will stall its decline.

Big names in the investment banking industry, such as Citigroup Inc. and Goldman Sachs Group Inc., have stated that the injection of $200billion into the economy by the Federal Reserve, who announced the plan yesterday, may still not be enough to pull the market out of its frozen desultory state.

A statement made by Donald Kohn, Federal Vice Chariman, that the credit market crisis and slow rates of growth were a stronger threat to the dollar than inflation has seen the euro trade above $1.50 for the first time since 1999, and the dollar fall by 3.6% against the euro in less than a month.

Since the onset of the credit market crisis and the meltdown of the subprime mortgage market, some of the worlds biggest investment banking and financial institutions have lost $190billion, according to figures released by Bloomberg, though through some collaborative efforts since December 12, the shortage of cash in the money markets have been somewhat aided.

According to traders, the Federal Reserve is likely to slash as much as 0.75% point on the 18th of this month in a bid to avoid a recession. The Chicago Board of Trade have stated that the chance of a reduction to 2.25% was 76%, and the bets balance is to be cut to 2.5%

Daniel Tenengauzer, a New York-based head of global currency strategy for Merrill Lynch & Co., wrote a research article in which he leads analysts in believing that the measures that are being taken by the Federal Reserve is merely a band-aid solution that indicates the concern they have the U.S. asset market, rather than any attempt to actually resolve the current turmoil.

Merrill Lynch are predicting that the dollar may decline even further this month, perhaps down to trade at $1.57 per euro.

Bloomberg surveys have shown that U.S. retail sales have risen 0.2% last month, and 0.3% the month before that. The data to confirm this should be released by the Commerce Department later today in Washington. Crude oil has seen its highest intraday price since it began trading in 1983, at $110.20 per barrel.

The ICE Futures in New York have shown the Dollar Index to have spiraled to a record low of 72.20 yesterday, though has lifted slightly to 72.30.

 

 

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