Monday, December 11, 2006
"A Few Years Of Dollar Weakness": Greenspan
Reuters reports on what's moving currencies. "The dollar weakened against European currencies and trimmed gains versus the yen on Monday after former Federal Reserve Chairman Alan Greenspan warned investors to expect 'a few years of dollar weakness.'"
"The remarks from Greenspan accelerated the dollar's slide against the euro. Investors bought euros after his remarks, unwinding short positions built on Friday when new U.S. jobs data proved robust enough to trigger a dollar rally. 'Mr. Greenspan's comments on the dollar definitely had an effect,' said Brian Dolan, director of FX research at Forex.com."
"'But the effect was one of triggering short-term stop orders. The fact is Mr. G is a very learned ex-Fed president. The onus is on the word 'ex-,' he added."
"The euro hit a session high of $1.3263, according to EBS data, after Greenspan's comments, and was last up 0.4 percent at $1.3250, having broken a three-day losing streak against the dollar."
"Greenspan added that he believed it was 'imprudent to hold everything in one currency,' a nod to the trend of central bank reserve diversification into other currencies and which traders took as a clear sell signal."
"Earlier in the session, the greenback had gained as investors prepared for another warning on inflation from the Federal Reserve, which meets on Tuesday for its last policy meeting of the year."
From Irwin Stelzer. "'YANKEE, STAY HOME' is what the world's currency markets are trying to tell us, as the dollar sinks to a level where it takes $2 to buy one British pound, and over $1.30 to buy a euro. And if you're thinking about a major purchase of a made-somewhere-other-than-the-U.S. product, think again."
"The flip side of that bad news is that America's exporters are cheering, while countries that have been counting on the United States to be the world's consumer of last resort are no longer so sure that they want us to cut our trade deficit. And Europeans with their newly powerful pounds and euros are finding that shopping here is so cheap that they can fly over, do their Christmas shopping in New York, and more than cover the cost of their airplane tickets."
The Street.com. "Gold drifted higher in thin trade Monday. The limited action centered on investors locking in profits ahead of the holidays. Contracts for February delivery of bullion were recently gaining $3 at $634 an ounce on the Comex division of the New York Mercantile Exchange."
"A dearth of liquidity looks set to be a market fixture from now through year-end. As a result, investors should be prepared for choppy conditions. 'A lot of people with 20%-plus returns are quite happy to call it a day and fix their gains for the year right now,' says Jon Nadler, an analyst at Kitco. 'Book-squaring among traders is much the feature of the day's session.'"
"Next year, investor demand will be needed in conjunction with a continuing weak dollar before the price for the yellow metal can be expected to breach major resistance at around $680 an ounce, Nadler explains."
"The greenback, which has provided much of the stimulus for the recent rally in bullion prices, was mixed in early trading. One dollar was buying 116.77 yen, up from 116.35 yen, late Friday."
"The remarks from Greenspan accelerated the dollar's slide against the euro. Investors bought euros after his remarks, unwinding short positions built on Friday when new U.S. jobs data proved robust enough to trigger a dollar rally. 'Mr. Greenspan's comments on the dollar definitely had an effect,' said Brian Dolan, director of FX research at Forex.com."
"'But the effect was one of triggering short-term stop orders. The fact is Mr. G is a very learned ex-Fed president. The onus is on the word 'ex-,' he added."
"The euro hit a session high of $1.3263, according to EBS data, after Greenspan's comments, and was last up 0.4 percent at $1.3250, having broken a three-day losing streak against the dollar."
"Greenspan added that he believed it was 'imprudent to hold everything in one currency,' a nod to the trend of central bank reserve diversification into other currencies and which traders took as a clear sell signal."
"Earlier in the session, the greenback had gained as investors prepared for another warning on inflation from the Federal Reserve, which meets on Tuesday for its last policy meeting of the year."
From Irwin Stelzer. "'YANKEE, STAY HOME' is what the world's currency markets are trying to tell us, as the dollar sinks to a level where it takes $2 to buy one British pound, and over $1.30 to buy a euro. And if you're thinking about a major purchase of a made-somewhere-other-than-the-U.S. product, think again."
"The flip side of that bad news is that America's exporters are cheering, while countries that have been counting on the United States to be the world's consumer of last resort are no longer so sure that they want us to cut our trade deficit. And Europeans with their newly powerful pounds and euros are finding that shopping here is so cheap that they can fly over, do their Christmas shopping in New York, and more than cover the cost of their airplane tickets."
The Street.com. "Gold drifted higher in thin trade Monday. The limited action centered on investors locking in profits ahead of the holidays. Contracts for February delivery of bullion were recently gaining $3 at $634 an ounce on the Comex division of the New York Mercantile Exchange."
"A dearth of liquidity looks set to be a market fixture from now through year-end. As a result, investors should be prepared for choppy conditions. 'A lot of people with 20%-plus returns are quite happy to call it a day and fix their gains for the year right now,' says Jon Nadler, an analyst at Kitco. 'Book-squaring among traders is much the feature of the day's session.'"
"Next year, investor demand will be needed in conjunction with a continuing weak dollar before the price for the yellow metal can be expected to breach major resistance at around $680 an ounce, Nadler explains."
"The greenback, which has provided much of the stimulus for the recent rally in bullion prices, was mixed in early trading. One dollar was buying 116.77 yen, up from 116.35 yen, late Friday."
# posted by Ben Jones @ 1:07 PM 
Comments:
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It all depends on Saudi Arabia, China and the big 5 foreign central banks.
In political science/game theory this is called "The Burning Theater Scenario": If a theater is burning and the entire audience cooperates and doesn't panic, everyone makes it out alive, but shaken. If any single person panics and runs, panic will ensue. The first few out will live but those in the back, will pile up and die. Game theory is pretty clear on this: Someone always panics. Why? Because no one wants to be the sucker left behind. The question is: who's going to panic first, and when?
In political science/game theory this is called "The Burning Theater Scenario": If a theater is burning and the entire audience cooperates and doesn't panic, everyone makes it out alive, but shaken. If any single person panics and runs, panic will ensue. The first few out will live but those in the back, will pile up and die. Game theory is pretty clear on this: Someone always panics. Why? Because no one wants to be the sucker left behind. The question is: who's going to panic first, and when?
The notion that an orderly decline in the dollar can be "managed" through economic diplomacy is just one more example of how diplomats drink their own koolaid.
Fear trumps all. It always does.
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Fear trumps all. It always does.
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