January 06, 2004
Dollar continues its penny a day decline.
The
Financial Times reports that the dollar continued its now a penny a day decline today, reaching $1.28/euro, albeit briefly.
The dollar extended its losing streak on Tuesday, reaching new three-year lows against the yen, lifetime lows against the euro and 11-year lows against the pound as traders struggled to find reasons to buy the US currency.
The euro broke above $1.28 for the first time in London afternoon trade, peaking at $1.2812 before easing rapidly to $1.275 in New York as profit-taking set in. But analysts were not fazed.
... Sterling continued its heady rally, reaching $1.8277, its highest since the pound's forced ejection from the European Exchange Rate Mechanism in 1992. The pound then succumbed to profit-taking and eased to $1.822 in US trade.
... On Tuesday, the Australian dollar reached a new six-year high at US$0.7725. Against the Canadian dollar, the ailing greenback was close to Monday's C$1.2775 10-year low at C$1.2784.
The dollar also sunk to new three-year lows against the yen, dipping to Y105.85 before bouncing back over Y106. It stood at Y106.16 in London trade.
On Monday, the Bank of Japan intervened to stem the yen's rise but only briefly succeeded in pushing the dollar higher before the selling began again. Derek Halpenny, currency economist at Bank of Tokyo-Mitsubishi, said the immediate move back down for the dollar was a dangerous sign.
Given the strength not only in the US stock markets, but markets worldwide, I'm not sure what this means, but there you are. It can't possibly continue to decline at this rate. At a penny a day that would mean $3-4/euro by the end of the year, if not more.
For a more general analysis of this all, including some historical perspective, see this article in the Guardian,
The Best Recovery Money Can Buy, by William Keegan, the Observer's senior economics commentator.
But for the moment George Bush is riding high on an economic revival that everyone knows means trouble via the twin budget and trade deficits in the medium term. As for the fiscal stimulus, more and more commentators are noticing that it is not just tax cuts that are boosting the US economy but vast increases in military - or, in the case of lucrative contracts in Iraq, militarily-induced - spending. That 1950s-style military industrial complex is back.
Yet it was Eisenhower himself who cautioned back in 1953: "Every gun that is made, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and not clothed." Happy new year.
It's about time someone acknowledged that the growth in US stocks is due almost entirely to warmongering and war profiteering, along with an easy money policy based on borrowing from future generations. But those are just short-term gains. That is, the rising Dow does not signify increased long-term investment in endeavors that have any long-term payoff, which is what capital markets are supposed to be about. On the contrary, it just represents the sacrifice of America's future fiscal and social health to Bush's reelection prospects. "After us, the deluge."
And yet another Guardian article on the subject,
No end in sight to dollar's descent, in which they lay most of the blame on the American Federal Reserve's policy of rock-bottom interest rate.
I won't quote much of it, but I did note this part.
"The dollar's fall has been orderly so far, but if it breaks through technical support levels at around $1.28, it could easily accelerate," said Nick Parsons, a currency strategist at Commerzbank.
"If it starts to hit the stock or bond markets, the US attitude would turn on a dime," he added.
Mr Bernanke said it was a mistake only to look at the dollar's sharp drop against the euro, adding that the greenback's fall against a broad basket of currencies had been much smaller. The risk of a "dollar crisis" was low, he maintained.
This is noteworthy, because just today it broke through that $1.28 level. And I don't think the risk of a "crisis" is low at all. I think it's already reached crisis levels. But I'm not an economist, so what do I know?
I have to link mostly to British and other foreign reports on this subject, since the American press seems to be studiously avoiding the issue.
