Dollar Sinks
May 21st, 2008 | By Doug Casey | Category: US Dollar & Forex TradingIn the currency market, the dollar fought back from its session lows but still sank against the euro. Late Tuesday, the euro was trading at $1.5647 vs. $1.5507 on Monday.
The dollar was “weaker on the day, as the buck really never recovered from the early sell-off” after the Labor Department’s PPI numbers, wrote currency strategists at Brown Brothers Harriman.
The producer price index slowed to 0.2% in April after seasonable adjustments, with food prices flat and energy prices falling. Economists were projecting a 0.4% rise
However, core PPI, which excludes food and energy prices, rose a higher-than-expected 0.4% in April. Core prices are up 3% in the past year, the biggest year-over-year rise since late 1991.
Also “Excluding food and energy, crude materials prices increased a whopping 7.9%, a level exceeded only twice since record keeping began in 1972,” said Tony Crescenzi, of Miller Tabak & co.
All this could leave the Federal Reserve with reduced incentive to further cut interest rates.
“Increased inflationary pressure, especially in the non-food and non-energy components, could hinder further monetary stimulus during the remainder of 2008,” wrote Matthew Strauss, of RBC Capital Markets.
And Fed Vice Chairman Donald Kohn may have supported that view when he said in a speech that the Fed is satisfied with its target for overnight lending rates at 2%.
Source: Dollar Sinks
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.