Dollar Clobbered Against Euro
Posted on: Dec 18th, 2008 | By Doug Casey | Filed under Financial News
In the currency market, the dollar prolonged its freefall against the euro, marking the sixth straight day of losses. Late Wednesday, the euro was trading at $1.4392 vs. $1.3891 on Tuesday.
Currency trading is all about the Fed. “With the funds rate now below Japan’s overnight rate, the dollar could supplant the yen as the new carry-trade currency,” said Sal Guatieri, senior economist at BMO Capital. Japan’s overnight call rate is set at 0.3%, above the U.S. benchmark for the first time since 1993.
“This likely means further declines for the greenback and a possible reprieve for commodities and resource-based currencies,” Guatieri added.
Stephen Gallo, head of market analysis at Schneider Foreign Exchange, put it bluntly: “The world is awash with greenbacks. They’re coming out of the woodwork, they’re growing on trees, and the markets are concerned.”
The buck hasn’t been helped any as European Central Bank officials are signaling they may pause in January before cutting interest rates further.
“I still believe the harsh macro reality [in the euro zone] will eventually force the ECB’s hand, but in the meanwhile its reluctance could push [the euro] toward $1.45 by January,” said Marco Annunziata, chief economist at UniCredit MIB.
One of the few losers against the USD was sterling, which declined after worse-tha-expected jobless numbers. Most now expect the Bank of England’s Monetary Policy Committee, after slicing interest rates a full point on December 4, to cut at least another half-point in January.
Source: Dollar Clobbered Against Euro
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