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RobertPaulson

$ Falls 1% In Opening Trade

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G7's sabre rattling seems to have a few people in a spin. Might be an eventful week. chart

FOREX-Dollar hits 3-mth low on yen as G7 presses China

Sunday 23 April 2006, 6:40pm EST

WELLINGTON, April 24 (Reuters) - The dollar slid about 1 percent to three month lows against the yen in early trade on Monday after Group of Seven countries singled out China in their call for more flexibility in exchange rates.

The G7 finance ministers and central bank governors, in a communique issued after a meeting in Washington, called for a further rise in China's yuan to help cut its growing trade surpluses with the rest of the world.

In morning trade, one dollar bought 115.68/71 yen <JPY=>, having been quoted as low as 115.35 yen <JPY=>. It fetched around 116.50 yen in late U.S. trade on Friday.

Analysts said the renewed pressure on China's currency regime hurt the dollar most of all given the United States ran a far larger trade deficit with China than any other country.

"The meeting highlighted a weakening path for the dollar given some pretty explicit statements from the G7," said Cameron Bagrie, head of market research at ANZ Bank.

He noted that, not only was China singled out, but the G7 seemed ready to transfer its power to a wider surveillance group in recognition that exchange rate policies are no longer a matter of concern for advanced industrial countries alone.

"The implicit message is that the U.S. dollar needs to go down, but the group of G7 does not want their currencies to endure the brunt of the appreciation. Hence, the dollar must go down against non-G7 nations," concluded Bagrie.

The euro firmed to $1.2370/73 <EUR=>, compared with around $1.2345 on Friday. It had gained late last week after Sweden's central bank said it had increased the share of euros in its foreign exchange reserves to 50 percent and cut the dollar's share to 20 percent from 37 percent.

Dollar sentiment was further dented after Russian Finance Minister Alexei Kudrin questioned the dollar's status as the wold's main reserve currency. The comment fed worries that other central banks might diversify their holdings away from dollars.

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Does this mean the BoE won't be putting up IRs? The common theory here was that the falling GBP against the USD was going to lead to inflation, interest rates, HPC and wolves roaming the streets of London looking for young, virgin blood.

<_<

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Guest Riser

It means that the Dollar and Sterling are both on the Titanic in an ocean of gold, its just that the Dollar is sitting on the bow wile Sterling is at the stern sipping Gin and Tonic and listening to the New Labour band.

The next few days could be cruch point for the Dollar I have seen some charts showing a head and shoulders chart formation so any potential falls could be massive.

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Guest Riser

Comments from the IMF - Significant devaluation of Dollar required - Now we can do this the easy way or the hard way the choice is yours B)

Revised IMF economic forecasts good for commodities

Amongst these is the required rebalancing of demand across countries and a realignment of exchange rates, “with the US dollar needing to depreciate significantly from current levels, and currencies in surplus countries – including in parts of Asia and among oil producers – to appreciate,” says the IMF. Which is of course also good for commodities.

To even out these imbalances, including the US’s massive current account and budget deficits, a number of co-ordinated policies are required. This involves things like increased private savings in the US and reforms to boost demand for domestic goods in surplus countries. Of course a more flexible exchange rate from the Chinese is also seen as important.

What will happen if this is not done?

“In the absence of policy adjustment, an orderly adjustment may take place, but only if investors are willing to hold substantially higher levels of U.S. assets (despite large capital losses) and if protectionist pressures are avoided,” says the IMF, “If these conditions are not met, there is a clear risk of a disruptive adjustment and a global recession.”

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Personally I think the big dollar decline will be delayed until 2007. Last year was predicted as a poor $ year but it rallied 20%. The US will do everything in it's power, including bombing Iran, to protect it's currency.

In addition, the long term cycle analysis I use doesn't predict a low in EURUSD until the end of 2006/early 2007. This is approximate of course but I expect the current political situations with Iran and the Oil$ to take at least 6 months before the real effect is seen.

After that, then the buck could go into free fall, purely because the US Govt would have played all its cards. The extent would depend on the amount of $ holdings foreign Govt's hold and how much they want to protect the value of their $ denominated assets. As countries are already moving currency reserves out of $ and into EUR then this may not help the $ much.

As usual, time will tell.

G-Man

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Does this mean the BoE won't be putting up IRs? The common theory here was that the falling GBP against the USD was going to lead to inflation, interest rates, HPC and wolves roaming the streets of London looking for young, virgin blood.

<_<

Both £ and $ down against Japanese Yen significantly over last few days. Just wait for Japanese IRs

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Lex: Foreign exchange reserves

Published: April 21 2006 13:31 | Last updated: April 21 2006 21:44

The world’s oldest central bank is proving to be among the most proactive in managing its foreign exchange reserves. In the last month, Sweden’s Riksbank, founded in 1668, has reduced its dollar exposure by 17 per cent, largely in favour of the euro.

(snip)

Pressure for more efficient management is increasing for two reasons. First, as reserves grow, the proportion over and above the total needed for liquidity purposes increases. Second, as Asia allows greater exchange rate flexibility, the risk of holding dollar assets rises, encouraging diversification. The venerable Riksbank may hold lessons for Asia’s more youthful central banks.

The question seems to be not whether the $ is revalued but when and against what. Currency markets can be a bugger to call correctly though! :(

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Personally I think the big dollar decline will be delayed until 2007. Last year was predicted as a poor $ year but it rallied 20%. The US will do everything in it's power, including bombing Iran, to protect it's currency.

Didn't they give tax breaks to companies who brought money back into America last year? That would have been a fair amount of artificial support.

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Didn't they give tax breaks to companies who brought money back into America last year? That would have been a fair amount of artificial support.

US corporations could repatriate USD without penalty in 2005, estimates quote around $300b flowed back in this way, which should have lent some support to the USD. A collapse in the $ could reduce inflationary pressures in the UK in the near term, however, many of the problems causing a tank in the yank are ones we also face, but without the support of being a petro-currency and a severe drop in USD would lead to the fed being forced to continue its tightening cycle (so bernakes 'one and done' has no chance) which should put more pressure on the BoE to follow. The continuing strength of the £ is something of a puzzle, because the fundamentals just don't justify it, but where the $ goes we will eventually follow. The USD vs the Yen is currently testing a reasonably key support level, if it breaks through we should see more drops in the next few days.

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Does this mean the BoE won't be putting up IRs? The common theory here was that the falling GBP against the USD was going to lead to inflation, interest rates, HPC and wolves roaming the streets of London looking for young, virgin blood.

<_<

I thought the Bull version of this was low inflation and interest rates, with the animal spirits from massive city salaries/bonuses bringing a return to galloping HPI in London, and as you say wolves roaming the streets of London looking for young, virgin blood.

Well both sides probably got the last bit right :D.

Edited by ajh

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A short time ago the dollar was at 1.74 to the pound.

Now today it is 1.79. Shows how shaky the dollar has become.

Our time will come though. Time to open up a Japanese Yen account. :)

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It means that the Dollar and Sterling are both on the Titanic in an ocean of gold, its just that the Dollar is sitting on the bow wile Sterling is at the stern sipping Gin and Tonic and listening to the New Labour band.

The next few days could be cruch point for the Dollar I have seen some charts showing a head and shoulders chart formation so any potential falls could be massive.

:lol:

I think you might be right. If the dollar tanks against the pound and euro it will crimp the EU who rely on exports to the US. Time to get into the Yen and Yuan? We live in volatile and unpredictable times. 1929-ish with so many people blissfully unaware of the coming financial earthquake.

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Amongst these is the required rebalancing of demand across countries and a realignment of exchange rates, “with the US dollar needing to depreciate significantly from current levels, and currencies in surplus countries – including in parts of Asia and among oil producers – to appreciate,” says the IMF. Which is of course also good for commodities.

To even out these imbalances, including the US’s massive current account and budget deficits, a number of co-ordinated policies are required. This involves things like increased private savings in the US and reforms to boost demand for domestic goods in surplus countries. Of course a more flexible exchange rate from the Chinese is also seen as important.

What will happen if this is not done?

“In the absence of policy adjustment, an orderly adjustment may take place, but only if investors are willing to hold substantially higher levels of U.S. assets (despite large capital losses) and if protectionist pressures are avoided,” says the IMF, “If these conditions are not met, there is a clear risk of a disruptive adjustment and a global recession.”

Any appreciation in the currencies of Asian countries would imply reducing US$ holdings (treasuries etc.), which would mean rising long term rates in America, which would most likely lead to a stateside HPC.

Why are American policy makers so keen to see appreciation of Asian Pacific countries currency? They rely on foreign investment capital to keep rates down and goods cheap. This protectionist agenda seems a bit stupid to me? The trade defecit is a symptom of a much wider problem.

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This protectionist agenda seems a bit stupid to me?

If they were smart, they wouldn't be in politics. The smart people buy politicans, they don't become them.

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Maybe a bit off topic but why did the Nikkei lose 3% today?

Almost:

NIKKEI 225 (OSA:^N225)

Index Value: 16,914.40

Trade Time: 7:00AM

Change: 489.56 (2.81%)

Prev Close: 16,914.40

Open: 17,245.62

Day's Range: 16,892.15 - 17,245.62

52wk Range: 10,788.60 - 17,563.40

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Any appreciation in the currencies of Asian countries would imply reducing US$ holdings (treasuries etc.), which would mean rising long term rates in America, which would most likely lead to a stateside HPC.

Why are American policy makers so keen to see appreciation of Asian Pacific countries currency? They rely on foreign investment capital to keep rates down and goods cheap. This protectionist agenda seems a bit stupid to me? The trade defecit is a symptom of a much wider problem.

The stateside HPC is a foregone conclusion. Both coasts are already collapsing with huge inventories of unsold houses with mortgage rates headed skyward.

The US must curb consumption and making foreign good more expensive by raising Asian currencies may be one way of achieving this. We must remember that when the US catches cold Europe gets the flu. With Japan hiking rates at the same time their stock market is crashing it is all shaping up to a massive loss of confidence around the world. That seems to be why people are running to gold for cover. Problem is gold has a history of violent booms and busts with few high plateaus. It is a speculator's commodity like no other.

With our economy showing signs of distress also things are looking a little shakey wherever you look. We could see the Nikkei collapse followed by the rest of the world's stock markets which in turn will lead to a confidence crisis pulling commodoties down with it. It seems to be a case of the yen carry trade unwinding and its hurting Japan as the transition plays itself out.

We are long overdue for a recession and we could all say that its a bubbly market out there at present with everything from gold to houses at unsustainable levels in relation to the real world of earnings and production.

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RB - those figures????? Did it go up or down? The figures on ceefax were red, therefore I assume it went down. Again, why?

OK just seen yr 2nd post. Ta.

Edited by Lars Bussholm

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From time to time I see mentioned the term economic cycle, and how if Gordon B can time it right then....etc etc. and no HPC or recession etc. Up until recently the UK was self sufficient in energy, and perhaps the US also, and, a lot has changed wrt world trade. I seem to think I saw that the economic cycles are about 18 yrs.

Question: Given the above, just how many economic cycles have there been under the present conditions (hardly any I suspect) so how much confidence should we have in any predictions as to what might happen?

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I think you might be right. If the dollar tanks against the pound and euro it will crimp the EU who rely on exports to the US.

It would make oil cheaper for us, though this seems to be instantly offset by $75 prices.

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Lex: Foreign exchange reserves

Published: April 21 2006 13:31 | Last updated: April 21 2006 21:44

The world’s oldest central bank is proving to be among the most proactive in managing its foreign exchange reserves. In the last month, Sweden’s Riksbank, founded in 1668, has reduced its dollar exposure by 17 per cent, largely in favour of the euro.

(snip)

Pressure for more efficient management is increasing for two reasons. First, as reserves grow, the proportion over and above the total needed for liquidity purposes increases. Second, as Asia allows greater exchange rate flexibility, the risk of holding dollar assets rises, encouraging diversification. The venerable Riksbank may hold lessons for Asia’s more youthful central banks.

The question seems to be not whether the $ is revalued but when and against what. Currency markets can be a bugger to call correctly though! :(

If I recall, Dr. B called this correctly. I remember him saying that the dollar would rally at the beginning of 2006 before starting its fall. I was hoping he would be wrong.

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Time to open up a Japanese Yen account. :)

Yes I’ve been thinking this too so what’s the catch as it seems too easy ?

Since last years I’ve been telling people to expect the GB£ to go as low as £1.00 = 1.10eu and now I bet a lot of people can see where I’m coming from.

Inflation at 2% is bull$hit and Blair has the printing press working 24/7 so it’s only time before the markets see this and with the drag from the USD$, the fail of the Pound could be very fast indeed

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  • 339 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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