Dollar at crossroads amid brighter US outlook

[cherokeeprogressive]

"This week will be crucial in determining whether the dollar has broken free from its six-year downward trend, as speculation mounts that the US is in the best position to emerge quickly from the economic downturn."

>snip<

"The dollar index, which measures its value against a basket of six major currencies, put in its best performance for over three-and-a-half years last week and boosted the dollar to its highest level for four months."

>snip<

"Ulrich Leuchtmann at Commerzbank said in a note he expected the dollar to rise “like a phoenix”. He said low US interest rates were not a burden on the dollar but an attraction, proof that the Federal Reserve was able to react quicker to turmoil than other central banks.

He said that in a very short period, “sentiment turned by 180 degrees – the market now believes that the US economy once again will be able to leave a crisis behind very quickly”.

David Deddouche at Société Générale believes a wider adjustment is taking place that will send the dollar higher."

>snip<

Great news huh? I bet this is going to piss off some people who're wishing capitalism would just collapse already...

From the Financial Times

[cliffordu]

1. I'm sure everything is just fine, now......

:sarcasm:

[cherokeeprogressive]

3. A "brighter outlook" isn't a statement that everything is just fine.

I guessed the story would piss some people off though. Glad I wasn't wrong.

[nadinbrzezinski]

2. You honestly believe our consumer driven society is capitalist as envisioned by

Adam Smith?

Okie dokie

by the way... this is the first time in 17 years that we expect to see a real spending contraction, and our economy is actually contracting

[cherokeeprogressive]

4. Frivolity takes a backseat to frugality for a while.

This is a bad thing?

[nadinbrzezinski]

7. Given our consumer society relies on us doing this for about

70% of our economic growth... yes it could be

It could spell recession or worst case depression

That said, this is NOT a capitalist system any longer... the theory only applies to your LOCAL mom and pop stores

[Eurobabe]

5. I smell bullshit, people are just speculating. Read the Daily Pfennig

www.dailypfennig.com

"Chuck has written about these types of markets in the past. The currency market starts looking for a reason to move one way, and no matter what the data look like, they spin it to fit the direction they want the currencies to move. Earlier this year, traders were looking for a reason to sell the dollar, now they are looking for reasons to buy it. But have the fundamentals changed? Is the US economy any stronger now than it was a few months ago?

Nope. Numbers released yesterday show US consumers borrowed more than twice as much as economists forecast in June as a decline in home equity forced Americans to fund purchases with credit cards and other loans. Consumer credit rose by $14.3 billion, the most since November, to $2.59 trillion. Consumers here in the US are using credit cards and loans to cover expenses as falling home values cause banks to restrict access to home-equity lines.?

[Union Thug]

6. uh, okay beavis.

except for the wicked high unemployment (when measured by more accurate methodologies), and equally high inflation, and shitty, low paying, no benefits McJobs, and the potential for mortgage crisis expanding beyond the sub-prime, negative savings in America, the widest wealth gap since the great depression... Things are looking GREAT! If you're a millionaire. The rest of us are screwed.

[MrModerate]

8. Since I'm paid in Aussie dollars but my salary is denominated . . .

in US dollars, the previous year has been a real bummer -- but the last two weeks rather cheery.

It's a double-edged sword, of course: a higher dollar means lower oil prices which means increased consumption which means more strain on the supply-and-demand relationship, which means increased oil prices which means a declining dollar.

Not to mention that increased consumption stifles conservation and leads to increased complacency regarding fossil fuel consumption and as a knock-on effect, greater input to the climate change mechanisms.

Nobody said this living in the real world was going to be easy.

[depakid]

9. Bloomberg has a different take....

Just because the dollar posted its biggest gain against the Euro in almost eight years doesn't mean the U.S. currency won't continue to be plagued by the nation's slowing economy, widening budget and trade deficits and negative inflation-adjusted interest rates.

The 4 percent surge against the single European currency this month was enough to prompt Bank of America Corp. to tell its customers to exit trades betting on more gains. Morgan Stanley still forecasts the greenback will approach a record low by October as the U.S. housing slump and credit-market losses keep the Federal Reserve from raising interest rates this year.

Barclays Plc in London and New York-based Merrill Lynch & Co. said trading patterns suggest the dollar's 5.1 percent gain in the past three weeks measured by an index of six major trading partners can't be sustained.

That's mostly because there's no indication the U.S. will return to the late 1990s annualized gross domestic product growth of 4.23 percent with inflation running at no more than 3.3 percent. Since September, 2000, the dollar has declined more than 44 percent as inflation accelerated to an annual 5 percent today, growth slowed to 1.9 percent and U.S. interest rates provide no cushion for holding U.S. assets.

``I would not chase the dollar's strength versus the euro as the pair has moved beyond interest-rate support,'' said Sophia Drossos, a strategist in New York at Morgan Stanley, who also recommended closing out bets on the dollar versus the currencies of Malaysia and Singapore. ``The dollar is not out of the woods.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a9FT.fPxbjF0&refer=home