US Dollar Whipping Everyone
Oct 13th, 2008 | By Doug Casey | Category: Financial News, US Dollar & Forex TradingIn the currency market, the dollar vaulted higher against the euro. Late Friday, the euro was trading at $1.3394 vs. $1.3594 on Thursday.
The dollar index was also up 1.5% against a basket of six major currencies, and the buck shoved the British pound below $1.68 before sterling rebounded back over $1.70. Nevertheless, the pound lost 0.65% on the day and 4% on the week, and the drop below $1.70 was the first since December of 2003.
The dollar’s strength certainly reflects the perceived weakness in other country’s currencies, but even so is a bit perplexing in the light of the turmoil in US financial markets. Obviously, its status as the world’s reserve currency, though tarnished, is still intact.
But some of its strength may be illusory, writes Brian Dolan, of Gain Capital: “During such panic driven turmoil, the Japanese yen strengthens across the board, and yen-crosses plunge. Such cross-selling pressure weighs on other dollar pairs, sending [pound/dollar], [euro/dollar], and [Australian dollar/U.S. dollar] lower and this is frequently viewed as U.S. dollar strength.”
Meanwhile, President Bush went on TV to try to reassure a nervous public that things are not as bad as they seem, even as high level talks began in Washington to deal with things that are every bit as bad as they seem.
Wrote Marketwatch.com: “Finance ministers and central bankers from the Group of Seven nations meeting Friday in Washington are expected to begin hammering out a round of coordinated, uniform measures designed to salvage the financial sector and encourage banks to resume providing loans to each other.”
Concurrently, Bloomberg reported that “Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world’s financial markets while they ‘rewrite the rules of international finance.’
“Berlusconi didn’t give any details about what kind of rules leaders were looking to change, except to say that leaders are ‘talking about a new Bretton Woods’.”
We are speechless.
Source: US Dollar Whipping Everyone
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