Dollar Drops On Reserve Concerns

Dollar drops on reserves concerns

- Wednesday, 23 February, 2005, 06:03 GMT
Recent rebounds in the dollar have proved to be short lived
The US dollar has dropped against major currencies on concerns that central banks may cut the amount of dollars they hold in their foreign reserves.

Comments by South Korea's central bank at the end of last week have sparked the recent round of dollar declines.

South Korea, which has about $200bn in foreign reserves, said it plans instead to boost holdings of currencies such as the Australian and Canadian dollar.
Concerns over the dollar's outlook, and rising oil prices pushed down US shares on Tuesday. The Dow Jones industrial average closed down 1.6%, while the Nasdaq lost 1.3%.

At 1930 GMT, one euro was worth $1.325, up 1.46% on the day.

The British pound had added 0.76% to reach $1.91, while the dollar had fallen by 1.25% against the Japanese yen to trade at 104.2 yen.

Mansoor Mohi-Uddin, chief currency strategist at UBS, said that there was a sentiment in the market that "central banks from Asia and the Middle East are buying euros".

A report last month already showed that the dollar was losing its allure as a currency that offered rock-steady returns and stability.

Compiled by Central Banking Publications and sponsored by the UK's Royal Bank of Scotland, the survey found 39 nations out of 65 questioned were increasing their euro holdings, with 29 cutting back on the US dollar.
http://news.bbc.co.uk/2/hi/business/4287413.stm

Bush and BushCo are RESPONSIBLE for the undermining of the American economy.

No excuses this time.

The almighty dollar needed to fall. Soon even China will have to allow its currency to float, which means they will look a lot less attractive to corporate bean counters trying to make the bottom line look better so they'll get a bigger Xmas bonus.

Remember, one of the reasons offshoring has looked so attractive is because the overly strong dollar made it look like people in other countries would work for less than it takes to feed (let alone house and clothe) an American.

In the short term, however, we're going to be in for a period of steep inflation, as imported goods become more expensive than anything we can produce domestically, which is the way it's supposed to be.

Try telling that to all those people out here with more debts than income, as it is.

What happens when the real estate bubble bursts later this Spring? Guess who has a corner on Fannie Mae and the REIT markets? Where else in America can those devalued dollars go? Go back East, young man. Far East.

But, by the time the Dow cushion has been used up, we should be at war with Iran. June, Scott Ridder says.

What happens then? Good news? Really?

a really, really long way, to cause China to look less appealing than here in terms of salary, if I understand it correctly?

As china decouples from the dollar their goods will get more expensive, meaning the waltons will have to raise prices, negating any competative advantage.

This could be very good for many small businesses around the country.

And, as the US slips, the PRC is perfectly positioned to pick up the pieces?

What about all those gas hungry SUVs parked in Wall*Mart parking lots with W-2004 and yellow tie stickers?

You know, in the long-run where all this is leading us? Ask the British in Spring 1913 what they thought about the future. Suckers.

A lot of us here will be SO fucked by "short-term inflation" we won't give a rat's ass about "long-term" anything.

My wife is from Brasil, a place that understands inflation.

She tells me of a time when a bar of soap costed half a Real one day, and the next it costed 10 Reals.

What are americans going to do when their SUVs are getting the equivalent to .12 mpg when the spike hits?

We need to start training to live on nothing.

The tsunami is coming.

wheeeeeeeeeeeeeeeeeeeeeeeee

that we should all try to pay off our debts, as much as possible. Lay low for the time being. Forget the champagne and Foie de Gras.

I'm currently living on much less than I make, because I can see disaster down the road.

I'm currently writing a cookbook for meals that cost less than $2.00, and so far I've collected about 25 recipes. I'm already getting requests for the book.

Think c-h-e-a-p.

Some of them aren't too bad. Wouldn't want to get used to them, though.

Does it involve buying and cooking in bulk? I am the leftover queen - I make some strange casseroles with leftovers and almost ANYTHING goes into an omelete as far as I'm concerned. Luckily my husband will eat anything.

I also eat tons of beans - black beans go great in scrambled eggs! YUM!

an awesome breakfast :bounce:

Saving won't do much good...you'll just watch it shrink. Diversify heavily in gold (a good wone is ticker GLD) and buy Euros. The point is to put your money into investments that move in the opposite direction of the dollar.

Leave the unsecured debt for last.

There is no economic justification for our standard of living. It is just a matter of time but it's inevitable that this house of cards is going to come down crashing,especially if the Repugs remain in power for the forseeable future.
This Admin. has mortgaged the country and the Repugs still think that Dubya is a great pResident.What morons!!!

<clips>

...A nice bedtime story, perhaps, but, like all such stories, there’s an element of fantasy. One delusion is that the US deficit still supports high real investment; it doesn’t. It increasingly mirrors open-ended government borrowing.

Investment in the real economy leads to growth, helping to repay higher debt. Government deficits just lead to higher taxes and lower growth. (Unless, perhaps, the funds are used to invest in high social return public infrastructure projects. Unfortunately, this is not the case today.) Usually, when a big current account deficit reflects a big government deficit, it is the beginning of the end.

A second fantasy is the notion that foreigners will continue to be satisfied with the miserable returns they have been getting on dollar investments. For complex reasons, foreigners have consistently earned stunningly low, often negative, returns in America. Japanese blunders are the stuff of legend (the purchase of New York’s Rockefeller Center at the peak comes to mind). But Europeans have not done much better. They invested heavily in bonds during the second half of the 1990s, until they switched into equities just ahead of the technology crash. Partly as a consequence of this asset depreciation, and also because of the fall in the dollar, America’s net indebtedness to the rest of the world has been more stable than one would expect given its heavy borrowing trajectory.

But this cannot continue. If foreigners don’t start earning normal returns, they will retrench. And if returns do rise, US net debt – currently around 25% of national income, a record – will start rising even faster. Then there is the much-ballyhooed accumulation of dollar reserves in China, Japan and rest of Asia, now approaching $2 trillion. Given the dollar’s vulnerability, and the low yields on Treasury bills, we are likely to see Asian central banks diversifying into other currencies. Lastly, most projections suggest that Japan’s savings rate will keep sinking as its population – which is ageing faster than any other in the developed world – retires.

http://www.globalagendamagazine.com/2005/kennethrogoff.asp