Wednesday, November 09, 2005


Too Far, Too Fast For US Dollar?

Bloomberg reports on the currency situation. "The dollar may fall for the first day in a week against the euro on speculation its rally yesterday to a two-year high was excessive given signs inflation is under control."

"The U.S. currency has climbed 15 percent versus the euro this year as the Federal Reserve raised interest rates to quell inflation. A government report tomorrow will probably show import prices dropped for the first month in five in October on declining oil prices."
"'Concern about a pick-up in inflation is easing as oil declines, meaning there is less need for the Fed to raise rates and less support for the dollar,' said Minoru Shioiri. 'The dollar gained too far, too fast.'"

"The dollar also may drop on speculation rising interest rates are making mortgages more costly, curbing home sales and threatening to slow economic growth. 'Some investors are worrying about the slowdown in the housing market, a key driver of the U.S. economy,' said Toru Umemoto. 'The abrupt slowdown in the housing market could lead to a loss of consumer confidence and a decline in assets, which makes investors cautious about buying the dollar.'"

"The dollar yesterday gained versus the euro on concern about rioting in France. Speculation social disorder will damp growth and deter investment in euro-denominated assets pushed Europe's common currency lower versus 11 other major counterparts."

"'The rioting is a cause for concern over the euro,' said Koichiro Amaya. 'It will harm the credibility of the euro-zone economy if the riots are prolonged, as the issue is deeply connected with policies toward immigrants.'"

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