Reply #17: dollar watch

[UpInArms]

http://quotes.ino.com/chart/?s=NYBOT_DX&v=i

Last trade 75.365 Change -0.649 (-0.85%)

Settle Time 15:01 Open 75.999

Previous Close 76.014 High 76.020

Low 75.210 2007-11-07 07:30:11, 30 min delay

52wk High 85.7 52wk High Date 2006-11-17

52wk Low 75.986 52wk Low Date 2007-11-06

Dollar in a Free Fall As Chinese Hint at Diversification

http://www.dailyfx.com/story/bio2/Dollar_in_a_Free_Fall_1194432421553.html

The dollar collapsed completely tonight in Asian and early European trade after Cheng Siwei, vice chairman of the National People's Congress stated that China should invest its nearly $1.5 Trillion of FX reserves in stronger currencies. The FX market instantly interpreted the remarks as a sign that the Chinese will begin diversifying their currency assets away from the greenback and as a result the dollar reached record lows against the euro, hitting 1.4705 in morning London trade. It fell materially against the pound as well taking out the 2.10 level.

Although, Mr. Siwei has a history of making broad economic comments that often do not reflect actual policy, and although the National People’s Congress is not involved in directly setting currency targets, today reaction speaks volumes about the extent of anti-dollar sentiment present in the FX market right now. The price action in the dollar is uniformly bearish, as currency traders fear that the problems in housing and finance sectors will drag the US economy into a recession in 2008, while the rest of the world will continue to expand and perhaps even tighten its monetary regimes.

Today the markets saw more evidence of that decoupling thesis as Reserve Bank of Australia raised its overnight rate to 6.75% despite the fact that the country is facing a Federal election at the end of the month. Governor Stevens noted that inflation has exceeded the central bank’s target and decided to act expeditiously. suggesting that further hikes may be in the offing. It is precisely this type of stark difference between the easing monetary policy of the Fed and the continued hawkish posture of US’ s major trading partners that has helped to produce the current round of dollar weakness.

Tomorrow all eyes will focus on the ECB press conference with President Trichet facing a very tough decision. Given their recent rhetoric European monetary authorities clearly want to raise rates by 25bp before year end, as inflation in EZ exceeds the ECB self imposed target of 2%. However, with EURUSD already trading at 1.4700 Mr. Trichet risks the possibility of pushing the pair to 1.5000 should he hint at a December hike. That in turn is likely to elicit howls of protest from EZ finance ministers who fear that the current currency regime will undermine the region’s economic recovery. If Mr. Trichet balks and holds rates steady, the EURUSD may finally embark on long overdue correction.

...more...

Forex News: Euro Hits Fresh Record Of 1.4704 Amidst Diversification Talk

http://www.dailyfx.com/story/dailyfx_reports/top_fx_market_movers/Forex_News__1194434714109.html



• AUDUSD – The Aussie hit fresh 23-year highs as the RBA raised rates by 25bp to 6.75 percent, as expected, and remained hawkish in their policy statement citing upside inflation risks from robust global and domestic demand.
• GBPUSD – UK consumer confidence, as measured by Nationwide Building Society, dwindled in October with the firm’s index of sentiment falling to 98 from 99.
• USDJPY – A Chinese advisor said that the government "will favor stronger currencies over weaker ones, and will readjust accordingly," suggesting that China will actively diversify its $1.4 trillion in FX reserves away from US dollars.
• EURUSD – German industrial production was surprisingly strong during September, as production rose 0.3 percent from the month prior led by energy, capital goods, and construction output.

...more...