Friday, October 27, 2006

 

US Dollar Down Sharply On Data

Bloomberg reports on the markets. "Gold rose in New York, capping the third straight weekly gain after a U.S. report showed economic growth slowed in the third quarter, weakening the dollar and boosting the metal's appeal as an alternative investment. Gold is up 16 percent this year, while the dollar index has fallen 6 percent against a basket of six major currencies."

"'There's a big focus on what could happen to the dollar,' said Carlos Perez-Santalla, a gold trader and president of Hudson River Futures in New York. 'I'm liking gold again.'"

"Gold futures for December delivery rose $1.20, or 0.2 percent, to $601 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price since Oct. 19. Prices gained 0.8 percent for the week."

"The U.S. economy grew at a 1.6 percent annual rate in the third quarter, the Commerce Department said today. The increase was less than forecast and the slowest pace in more than three years, as housing slumped and the trade deficit widened."

"Former Federal Reserve Chairman Alan Greenspan said central banks and private investors are beginning to shift holdings from the dollar to the euro. 'We're beginning to see some move from the dollar to the euro, not only in the private sector, but by monetary authorities, by central banks,' Greenspan said yesterday."

"'Mr. Greenspan's comments about migration into the euro is on the supporting side for gold,' said Frank McGhee, head metals trader at Integrated Brokerage Services Inc. in Chicago. The metal faces resistance at $600, analysts who study price charts said. Today is the third time gold has closed above $600 this month."

"'Gold needs to get through a series of important resistances between $602 and $605 to attract substantial fresh buying,' said Robin Bhar, an analyst at UBS AG in London."

"The dollar fell the most against the yen in more than five weeks and declined versus the euro after a government report showed U.S. economic growth slowed in the third quarter. 'The GDP number was the catalyst to sell dollars,' said John McCarthy, director of currency trading at ING Financial Markets LLC in New York. 'For the dollar to fall and break out of the ranges we've seen all year, you've got to have the yen participating.'"

"The U.S. currency fell to 117.58 yen at 4:01 p.m. in New York from 118.38 yesterday. The dollar declined for a fourth consecutive day against the European currency to $1.2735 per euro, from $1.2694 yesterday, the longest losing streak in more than five months. The dollar also fell against the Danish krone, British pound and Swiss franc, and was weaker versus 13 of 16 major currencies tracked by Bloomberg."

"The Canadian dollar jumped to its highest point in nearly a month against the U.S. currency on Friday, as data showing a much bigger than expected slowdown in U.S. third-quarter growth sent the greenback down sharply."

"This reinforced the somewhat dovish tone of the U.S. Federal Reserve's statement earlier this week and drove the greenback decisively below the C$1.12 level for the first time since Oct. 3. 'Purely from a psychological point of view, that's an important level,' said Matthew Strauss, senior currency strategist at RBC Capital Markets. 'I think from this point forward the market will much more sensitive to any news that might indicate a further slowdown in the U.S. economy.'"

"However, if the U.S. weakness persists and begins to affect Canadian growth via trade performance, the Canadian dollar could find itself cooling as well, he said, particularly versus overseas currencies."

Comments:
I found that Australian link:

'TREASURER Peter Costello has called on East Asia's central bankers to 'telegraph' their intentions to diversify out of American investments and ensure an orderly adjustment.'

'Central banks in China, Japan, Taiwan, South Korea and Hong Kong have channelled immense foreign reserves into American government bonds, helping to prop up the US dollar and hold down American interest rates.'

'Mr Costello said 'the strategy had changed' and Chinese central bankers were now looking for alternative investments.'

'Of course you can have an orderly adjustment,' he told reporters. 'And what I would recommend is that these matters be telegraphed well in advance. I think we should begin preparing ourselves for it.'
 
Ahead of next month's G20 meeting in Melbourne, Mr Costello called on regional leaders to reform their anachronistic financial systems.He said underdeveloped financial markets were to blame for the emerging economies of East Asia sending 94 per cent of outward portfolio investment to "ageing" countries (A.k.a USA & Europe) outside the region. He said the region needed to improve poor macroeconomic frameworks, inadequate regulatory systems, uncompetitive markets and insufficient investment in health and education. It seems to me that Mr. Costello wants China to buy local, but that local isnt up to snuff, not worth the investment as it stands, needs some paint and granite countertops so to say? Or does Mr. Costello have the inside skinny and he KNOWS that is what is planned? Expansion of China is supposed to be the plan, as I have read their leaders say in the past, like the US expanding from sea to shinning sea. It was an unsettling indication when Mr. Costello did not answer if he thought China would be a force for good, like an American politician or something. Investment in local Asia is what I think he has in mind for US Dollars that are currently in, or going into US Treasurys. If China telegraphed their intentions to make investments in Asia local rather than US Treasurys, hmm boom town Asia? Sterilized asian property, in Greenspaneese. The Middle Eastern nations, could they, would they pick up the slack? US generals say that it is not, "if", but, "when" war between US and China. To avoid the war talkin/drumbeating, China would have to trickle money slowly towards Asia and not surge. Sorta like the CB gold sales agreement? THIS could be everything for lifting the price of gold, or should I say, lowering the value of the US Dollar? OT- I read the Indians are giving gold biscuits and bars instead of jewelry for their holiday. Are Indian women all that different than US women? Last time I gave a gold coin to a girl for a gift was the, "last" time. Not well recieved. Will Indian women promptly go out and trade or cash in gold biscuits and bars after the holiday?
 
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