Tuesday, April 18, 2006


'People Looking For Reasons To Sell US Dollar'

Bloomberg reports this mornings' data is undermining support for the US dollar. "The dollar neared its lowest against the euro this year as investors pared bets the Federal Reserve will raise interest rates two more times after reports showed housing starts slowed and inflation remained tame."

"The dollar extended its drop a fourth day as speculation mounted that the central bank may pause in its rate raising campaign after it meets on May 10. Concern growth in the world's largest economy will slow prompted the dollar yesterday to slide the most against Japan's currency since March."

"The dollar dropped to $1.2276 against the euro at 11:51 a.m. in New York, from $1.2250 yesterday. It earlier reached $1.2302, nearing $1.2332, the low for this year reached on April 6. The U.S. currency weakened to 117.71 yen, from 117.81."

"'The fact that the housing numbers were lower than expected, that is a red flag,' said Matthew Lifson, chief currency trader at PNC Capital Markets. 'The U.S. economy may begin to slow.'"

"Investors are looking to the minutes from the Fed's last monetary policy meeting later today for signs of whether central bankers favor additional interest rates increases this year."

"The Wall Street Journal on April 14 reported that some Fed officials aren't convinced rates will need to rise as much as investors expect. The U.S. currency has declined about 3.7 percent this year versus the euro on anticipation higher borrowing costs are slowing growth. It is little changed in 2006 against the yen."

"The dollar gained about 14 percent last year against the euro and yen, as rising rates made U.S. assets more attractive to foreign investors. That may begin to change as the Fed stops raising rates while the European Central Bank and Bank of Japan are expected to raise rates through the year. The difference, or spread, between yields on U.S. 10-year Treasury notes and similar maturing German debt was 1.05 percentage points today. It narrowed to less than 100 basis points earlier this month and has averaged 51 basis points over the last five years. The spread between U.S. and Japanese debt was 304 basis points."

It appears the Fed has decided to inflate his way out and save the American Consumer.

The Dollar is under the magnifying glass it's April and smoke is rising. In the end will it be worth more than a pile of ASH?
Kitco's quoting gold ask's of $623 and silver of $14. Whew! This is only the beginning of phase II; can you imagine what phase III will look like?
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