Monday, November 27, 2006


US$ Off To Weak Start

Bloomberg reports on the overnight US dollar trade. "South Africa's rand rose to its highest in almost three months as the price of gold, the country's single largest export, advanced. The currency also added to its 1.6 percent gain last week amid speculation reports will show the U.S. economy is slowing, making it less likely the Federal Reserve will increase rates."

"'We've seen the gold price spike up as the dollar has fallen,' said Kimon Boyiatjis, who heads Trident Capital, a Cape Town-based hedge fund with about $400 million in assets. 'There's definitely a strong correlation between the currency and precious metals.'"

"Against the dollar, the rand rose as much as 1.4 percent to 7.07, the highest since Aug. 31, and was trading at 7.11 at 9:43 a.m. in Johannesburg. It has advanced 1.7 percent in the past seven days, cutting its losses for the year to 11 percent, still the worst performance of the 71 currencies tracked by Bloomberg."

"Gold for immediate delivery rose as much as $3.40, or 0.5 percent, to $642.15 an ounce, the highest since Aug. 11, and was trading at $640.40 at 7:31 a.m. in London."

From China Daily. "The value of the Renminbi against the US dollar hit a new high on Monday, with the central parity rate at 7.8402 yuan to one dollar, breaking the 7.85 mark."

"This signifies that RMB value has risen by 5.31 percent since July 21, 2005, when the Chinese government launched the reform of the exchange rate system to allow the yuan to float against the U.S. dollar within a daily 0.3 percent band from the official central parity rate."

"The appreciation followed previous records on November 9 when the central parity rate hit 7.8697, breaking the 7.87 mark, and November 23 when it was 7.8596, breaking the 7.86 mark. The exchange rate was set at about 8.27 yuan per US dollar before the reform."

"US critics have argued that China's currency is undervalued by as much as 40 percent, giving Chinese goods price advantages and resulting in a mounting trade deficit for the United States, which has exacerbated the pressure to appreciate the yuan."

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