Dollar slides as US business slows

[240 is Back]

As Delusional and kh300 will soon chime in, a weakening dollar and slumping sales are G-R-E-A-T for Americans! 

By Richard Beales in New York

Published: November 30 2006 18:42 | Last updated: December 1 2006 00:12

The dollar suffered sharp falls on Thursday, hit by reports of weak US business activity and a benign inflation picture.

The euro rose 0.7 per cent against the dollar to $1.3247 by late afternoon in New York after data from Chicago purchasing managers indicated that business activity in the Midwest unexpectedly fell last month.

Sterling rose to its highest level against the dollar since its ejection from the European Exchange Rate Mechanism in September 1992 as UK house prices continued to show rapid growth. The pound rose to $1.9699 before edging back to $1.9658, almost 1 per cent up on the day. The yen also gained, up 0.5 per cent against the dollar to Y115.77.

A report revealed that inflation in US personal consumption expenditure excluding food and energy, the Federal Reserve’s preferred inflation benchmark, held steady in October at 2.4 per cent year-on-year. Data suggested further inflation-fighting interest rate rises by the Fed, which could support the dollar, were even less likely to be needed.

The slide in the dollar was briefly arrested on Wednesday following an upward revision to official estimates of US third-quarter growth.

Michael Woolfolk, foreign exchange strategist at Bank of New York, said: “[The] personal income and spending report and Chicago PMI were the one-two punch that knocked the dollar back on the ropes, leaving little doubt over near-term direction in the beleaguered greenback.”

The Chicago purchasing managers’ index is regarded as a leading indicator of the national manufacturing index from the Institute for Supply Management, due today. The Chicago PMI index fell to 49.9 last month from 53.5 in October. Many economists had expected it to rise. The core personal consumption expenditure deflator, which excludes food and energy prices, rose 0.2 per cent, against a consensus forecast of 0.1 per cent.

Simon Hayley of Capital Economics said risk aversion could start playing a greater role in the dollar’s decline, as traders shied away from the carry trade, in which traders borrow cheaply in yen and buy higher-yielding currencies: “The risk of short-term dollar weakness may now be greatest against the yen.”

But Alan Ruskin, chief international strategist at RBS Greenwich Capital, said: “Ultimately the lesson from recent days and many other past events is that a weaker US dollar is highly unlikely to turn into a freefall [and] tends not to have a lasting negative impact on US asset markets,” he said.

[JasonH]

Great for us Brits - well, not for British exporters but good for imports.

I just don't understand that if Oil is bought in dollars, then how come the oil price has been going up over the last few days - surely if we're buying light, sweet crude it would go down?

[240 is Back]

oil levels were pushed artificially high by the Saudis leading up to Nov 01 2006.  Some former US President asked them to help out some elections.  Once they returned production levels to normal, the price started a slow climb. The dollar slumping helps you brits a tad, but all in all, you're fucked with the rest of us on oil prices starting in Jan

[240 is Back]

Dollar slides further on manufacturing data

 turbulent week for the dollar ended with further sharp falls after manufacturing activity in the US contracted for the first time since April 2003.

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Peter Garnham on sterling’s strength against the dollar


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The dollar plunged as low as $1.9847 against sterling and to $1.3348 against the euro on Friday after the Institute of Supply Management’s manufacturing index fell unexpectedly to 49.5 in November, from 51.2 in October. This signalled that manufacturing activity in the US contracted in November after more than three years of growth.

“The ISM index is likely to be alarming for the Federal Reserve given its dual mandate for both growth and inflation,” said James Knightley, at ING Financial Markets. “If the economy slows in line with the ISM, inflation worries will quickly dissipate with the prospect of rate cuts.”

A run of weak US data this week has dogged the greenback, adding to a combination of bearish factors.

The weak data has heightened expectations that the Federal Reserve will begin cutting US interest rates. This has led to concerns that high levels of risk, such as carry trades, which had hitherto supported the dollar, could be unwound.

The acceleration of dollar losses has amplified the chorus of central bankers talking about diversifying their reserves into other currencies, such as sterling and the euro.

Benign inflation data on Thursday took away another crutch for the dollar, with many traders predicting that sterling would soon rise to more than $2.

[Camel Jockey]

oil levels were pushed artificially high by the Saudis leading up to Nov 01 2006.  Some former US President asked them to help out some elections.  Once they returned production levels to normal, the price started a slow climb. The dollar slumping helps you brits a tad, but all in all, you're fucked with the rest of us on oil prices starting in Jan

Don't you think the saudis have their own agenda? They clearly want to keep America oil dependent so they started pumping oil to get prices down, but to a point where they can still make good money. And to a point where the US wont start drilling in Alaska or pursue alternate means.
Dunno if Bush has that much influence to the point where he can call up the Saudis and ask them to pump more.

[Delusional Liberal]

As Delusional and kh300 will soon chime in, a weakening dollar and slumping sales are G-R-E-A-T for Americans! 

yes, at the current time, it's more positive than negative.  stop trying to make a weakening dollar into some doomsday scenario you clown.  just another blip in the american economic timeline.

[240 is Back]

yes, at the current time, it's more positive than negative.  stop trying to make a weakening dollar into some doomsday scenario you clown.  just another blip in the american economic timeline.

First blip in many years if you're walmart or trading against the euro.

'more positive than negative' sounds like you're starting to concede there is some negative things happening with the buck.

[Eyeball Chambers]

yes, at the current time, it's more positive than negative.  stop trying to make a weakening dollar into some doomsday scenario you clown.  just another blip in the american economic timeline.

You're telling me the value of the dollar dropping against other Countries Currency is more positive than negative? Traitor!!!!!!!!! 

[Mr. Intenseone]

What goes up comes down.....it's normal, this is no great revelation. Why are you making a big deal out of the norm??

[240 is Back]

the dollar shouldn't be this poor with the Dow this high though.  This would point to a very small group at the top doing very well while spending power is dropping.  These trends have to end one of two ways.  The small group at the top will be nice and let the Dow reset to 10500 where it should be to match the weaker buck, or they will sell at the top, which will drop the dow to 9000 and hurt the retirement packages of 98% of americans and weaken the buck further.  high dow and weak dollar = very bad combo

[Delusional Liberal]

First blip in many years if you're walmart or trading against the euro.

'more positive than negative' sounds like you're starting to concede there is some negative things happening with the buck.

yes of course there are negatives.  but theres no impending doomsday economic scenario for the US, you simply just don't know what you're talking about.  just like the people who think the national debt is a doomsday crisis.

[240 is Back]

yes of course there are negatives.  but theres no impending doomsday economic scenario for the US, you simply just don't know what you're talking about.  just like the people who think the national debt is a doomsday crisis.

I'd make a wager, but since we won't be having much $ left to pay up, it's a moot point.  You may believe what you wish. 

[24KT]

oil levels were pushed artificially high by the Saudis leading up to Nov 01 2006.  Some former US President asked them to help out some elections.  Once they returned production levels to normal, the price started a slow climb. The dollar slumping helps you brits a tad, but all in all, you're fucked with the rest of us on oil prices starting in Jan

Not all of us.     

[Nordic Superman]

This is shit, I get paid in USD.

I might as well be fucking paid in monopoly money

[24KT]

This is shit, I get paid in USD.

I might as well be fucking paid in monopoly money

Well, there's a first time for everything, ...and here it is.
I truly feel your pain Nordic. For the past 4 yrs., I've seen the USD slip and it's been pissing me off to no end.

[240 is Back]

Well, there's a first time for everything, ...and here it is.
I truly feel your pain Nordic. For the past 4 yrs., I've seen the USD slip and it's been pissing me off to no end.

Nonsense.  Delusional Liberal will tell you that the 4 year slide is part of the Federal Reserve's plan to make the dollar stronger.  All you silly liberal people don't know what you're talking about.  What you call a 4 year slide, I call a 4 year "power nap"!

[Tesla]

oil levels were pushed artificially high by the Saudis leading up to Nov 01 2006.  Some former US President asked them to help out some elections.  Once they returned production levels to normal, the price started a slow climb. The dollar slumping helps you brits a tad, but all in all, you're fucked with the rest of us on oil prices starting in Jan

You predicted that gas prices would skyrocket after the elections, not slowly climb, as part of a massive election conspiracy for the Republicans to keep Congress.  They've gone up about 10 cents/gallon where I'm at and they started climbing a week or so before the election actually happened.  I'm not seeing any conspiracy here...

[240 is Back]

We're only 3 weeks into it.  Wait and see. Dollar weakens daily and companies are gonna get hit thrice (higher gas prices, lowered dollar value, less spending this holiday season).

A "conspiracy" would be a plan between two or more people.  Do I believe it was no coincidence that the Saudis over-outputted oil for the two months before the election, and perhaps they spoke and agreed to do so to keep a favorable voting party in DC?  Of course I do.

[Hugo Chavez]

What goes up comes down.....it's normal, this is no great revelation. Why are you making a big deal out of the norm??

185lbs Franco Columbu Bench 520lbs

VS.

 181lbs Mr. Intenseone  Bench 535lbs.... 

[Straw Man]

the dollar shouldn't be this poor with the Dow this high though.  This would point to a very small group at the top doing very well while spending power is dropping.  These trends have to end one of two ways.  The small group at the top will be nice and let the Dow reset to 10500 where it should be to match the weaker buck, or they will sell at the top, which will drop the dow to 9000 and hurt the retirement packages of 98% of americans and weaken the buck further.  high dow and weak dollar = very bad combo

question

if you were a big owner of dollars

would you tell anyone that you thought it would be a good idea to sell dollars

on the other hand

if you were a big player and you wanted to buy dollars

what might you do

btw - based on nothing and should be taken for what you paid for it

[240 is Back]

Everyone has different motivators.  US will say it's stronger than it is.  EUROPE will say its weaker than it is.

Actions speak tho.  Indonesia, Rus, and China all dumping it - that is scary

[Straw Man]

i'm not unconcerned about that but I don't really think it will effect most people that much (btw - I'm exposed to $ risk more than most so take that as you will) , and  i'm aware of my finances and I have a significant interest in the strength of the dollar

remember

for most people it doesn't really matter because they buy and sell in $'s

if this starts to really effect prices at home and wages don't change then it will become a problem

[240 is Back]

Any thoughts on what real estate will do in the next 18 months?

[Straw Man]

my guess is mostly flat

but then again not necessarily a bad time to be a buyer

obviously it's best to be a buyer just before prices start to go up

at least with RE you can calculate a decently reliable element of intrinsic value

[24KT]

You predicted that gas prices would skyrocket after the elections, not slowly climb, as part of a massive election conspiracy for the Republicans to keep Congress.  They've gone up about 10 cents/gallon where I'm at and they started climbing a week or so before the election actually happened.  I'm not seeing any conspiracy here...

And I'm still predicting it. Give it time.

btw - are you aware that in certain parts of North America, they've seen absolutely no relief from the prices we saw last spring & summer? Are you aware that in many parts of Europe & elsewhere in the world, the prices are still going up with no relief in sight? Keep your yankee-centric outlook my friend, ...my perspective is a global one. The world does not end at the US border, quite the contrary, ...in many cases, that's where it begins.

ps - PS a gallon is nothing to you because you've been conditioned to it.
We once saw a 2 cents per litre increase, and we threw the prime minister out of office.