EU-DIGEST

Inflation fears threaten US creditworthiness - by Korkut Erturk

The exceptional advantage the United States has in being able to issue its liabilities in its own currency has shielded it from the worst ravages of the financial crisis any other country would have experienced in its position. But fears that the United States might be forsaking this advantage are mounting. The issue isn't the imminent collapse of the dollar, but that the United States will be increasingly constrained in its fight against the economic downturn by concern over the sagging value of the dollar. In his visit to Beijing this past summer, US Treasury Secretary Timothy Geithner looked like a wastrel trying to appease his creditors, giving assurances to skeptical Chinese audiences. Increasingly, the Federal Reserve finds it has to assure investors of its "exit strategy" from extreme monetary easing. Yet, the only thing that can sustain aggregate demand, and thus income and employment, in the period to come is to keep up the fiscal stimulus.

Anything that poses a threat to the large budget deficits the Barack Obama administration is running, and will continue to in the coming years, is liable to worsen the economic slump. Whether warranted, inflation fears pose a threat.

Labels: Dollar, Economy, Inflation, US

Dollar Touches 14-Month Low as Recovery Signs Spur Risk Demand

The dollar reached a 14-month low versus the euro as stocks advanced around the world on confidence that the global economy is recovering, increasing demand for higher-yielding assets. Brazil’s real and Mexico’s peso were the biggest gainers versus the dollar among the 16 most-traded currencies tracked by Bloomberg. The South Korean won was the best performer among 10 emerging Asian currencies as the nation’s economy grew at the fastest pace in seven years. “Risk is a little bit positive, and that’s helping the dollar weaken,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. “The overall theme of the dollar weakening versus Asia is continuing.” The dollar traded at $1.5016 per euro at 9:31 a.m. in New York, compared with $1.5008 on Oct. 23. It earlier declined to $1.5063, the weakest level since August 2008.

Labels: Dollar, Economy, Inflation, US

Now Europe's Freaking Out About The Weakening Dollar - by Vince Veneziani

With the U.S. dollar at a 14-month low against the Euro, the pressure is on for the European Union to join Brazil and certain Asian economies in helping prop up the dollar. What you're seeing now is a sharp reversal from the tone from just a few weeks ago, when central bankers were stoking rumors about a new reserve currency to replace the dollar. The European Central Bank is considering taking steps to ensure that the dollar doesn't drop any further against the Pound and the Euro. Investors are concerned that the Euro-Zone finance ministers convening at a regular meeting later in the day in Luxembourg could fire warning shots over EUR strength. This could ramp up pressure on the European Central Bank (ECB) to consider steps to curb any further rises in the currency, analysts said.

Labels: Dollar, EU, euro

Europe's Loveless Lust for a Strong Dollar- by Mike Mish Shedlock

Seriously, European Central Bank President Jean-Claude Trichet can’t possibly be serious when he says Europe takes the strong US dollar policy seriously. “We all note with considerable attention the statements made by American authorities as regards their support in favor of a strong dollar,” Trichet told reporters in Luxembourg late yesterday after a meeting of European finance ministers. He also echoed the Group of Seven statement that “excessive volatility and disorganized developments in the exchange market was bad for economic development.”

Labels: Dollar, EU, euro

Dollar's future as reserve currency in focus as world leaders meet - by Pan Pylas

Investors will be keeping a close eye on how far world leaders will go in expressing support for a strong dollar at the Group of Eight summit in Italy, amid talk that the dollar's status as the world's reserve currency will be on the agenda. China, Russia and India have indicated that they want to see long-term changes in the international monetary system in the wake of the financial crisis that has pushed the world economy into its first synchronized downturn since the Second World War.

Labels: Currency, Dollar

As Stimulus Piles Up Dollars, Their Value Falls - by Jack Healy

The dollar was on a roll just a few months ago, bounding higher against foreign currencies as investors sought a safe hiding place for their money amid a global downturn. But now, many are rethinking their decision to buy American.The Federal Reserve is printing money from thin air, and the government is issuing trillions of dollars in new debt as it tries to spend its way out of the recession with a huge stimulus package, new lending programs, health care overhauls and automotive rescues. Experts warned there might not be enough demand to sop up all those new dollars and dollar-denominated Treasury securities. That led investors to fret about the sustainability of the United States government’s AAA sovereign credit rating after the Standard & Poor’s ratings agency warned this week that the sovereign rating of Britain — which is spending hundreds of billions of pounds to engineer a recovery — is under threat.

Labels: Dollar, US

Dollar could collapse - Bernanke may need Rosy Scenario's help to stem inflation - by Irwin M.Stelzer

Now, just as the economy might be picking up, all of that cash has driven the inflation rate to almost 3%, “a sure sign of inflation … Enormous budget deficits, rapid growth in the money supply and the prospect of a sustained currency devaluation … are harbingers of inflation”,” according to Allan Meltzer, an economics professor at Carnegie Mellon University.And not just your garden-variety inflation, observers fear. Andy Xie, former chief economist at Morgan Stanley, writing in the Financial Times, expects inflation so severe that, along with some changes in China’s policies, it could produce a “collapse” of the dollar. Bernanke now has to decide whether the green shoots foretell a sustained recovery, and whether his policies and President Obama’s trillion-dollar deficits therefore threaten to trigger inflation. If the answers are “yes,” he then has to begin withdrawing cash from the system. That will displease his political masters, who do not want anything to interfere with a recovery on the eve of next year’s congressional elections.

Labels: Dollar, US Economy

China's Assault On The Dollar - by Gordon G. Chang

"I don't believe that there's a need for a global currency," said President Obama Tuesday night during his prime-time press conference. Well, the Chinese sure do. Zhou Xiaochuan, head of China's central bank, called for the replacement of the dollar in a text released Monday.Some economists, such as Nobel laureate Joseph Stiglitz, have called for the replacement of the dollar. And concerns about depreciation of America's money are real and not just confined to the Chinese. U.S. Treasury Secretary Timothy Geithner inadvertently highlighted this widespread concern on Wednesday when he said Washington was "actually quite open" to the Chinese proposal. (He later backtracked after the dollar collapsed as a result of his ill-considered comment.

Beijing, by floating its proposal at this moment, is beginning a new round of debate about the future of the dollar and, by extension, the role of the U.S. in the global order.

Labels: China, Dollar, US

Euro up against dollar on US banking fears

The 16-nation euro rose Tuesday against the dollar as worries about the financial health of U.S. banks offset a small drop in German business confidence.The dollar was hurt by reports that Citigroup Inc. and insurer AIG have asked for billions more in aid from the government. The banking fears caused the Dow Jones industrials average and the Standard and Poor's 500 stock index to fall to their lowest close since 1997. Those concerns also offset news that business confidence, as measured by Germany's Ifo institute, declined slightly in February in Europe's largest economy. The institute said companies' expectations for the next six months improved slightly but their assessment of the current situation worsened.

Labels: Dollar, EU, euro, US

The U.S. Dollar Death Dance - by Jim Willie

The US Dollar rally in the last several weeks has been remarkable. At closer examination, it highly resembles a spurt prior to death. Imagine an old man who just had a heart attack, lost feeling in certain body parts, his mind not working right, plenty of nonsense gibberish coming from his mouth, and now he is dancing hard on some last gasps. The vast liquidation movement is akin to the old man going through an embalming process while dancing atop the tables at the funeral parlor, as bidding proceeds for his cadaver.Are Americans last to realize the financial structure destruction means the US Economy does not enter a recession, but rather a bizarre unprecedented disintegration? It seems so. The liquidation of speculative positions, the massive de-leveraging, the payout's of defaulted bonds, these events are the opposite of developments toward revival or resuscitation, like business investment!! Liquidation is the exact opposite of investment, and precedes job cuts, not job creation.

What is pushing the US Dollar up cannot be construed as anything remotely resembling healthy factors. In no way whatsoever does it resemble investment. It is more like paid off death contracts, paid off death investments, paid off transfers from toxic US bonds into what are falsely regarded as safer US bonds with a guarantee from a crippled USGovt. Foreign financial entities are liquidating on massive scale. They need a tremendous amount of US Dollars in order to complete transactions. Also, a tremendous amount of US Dollars are needed for CDSwap payout's as defaulted bonds are resolved. Almost all CDSwap and other credit derivatives are paid out in US Dollars The Lehman Brothers payout was full of lies, again. The Lehman Brothers total volume of corporate bonds was $160 billion, but $400 billion existed in total CDS volume tied to them! It is no surprise that the Dow and S&P500 stock indexes fell hard (by almost 400 points on Dow) and on the Lehman resolution day. And market mavens boasted of no impact on the Lehman funeral date! Big disruptive events are occurring in the distribution system. Letters of credit are routinely being refused by export nations who distrust US sources. A fall of 10% to 20% in shipping traffic to western US ports has been reported. Ships are empty at Asian ports, some even loaded but interrupted on their voyage to US ports and European ports. Many details are given in the October Hat Trick Letter reports. Even manufacturers of shipping vessels are being severely affected, as credit has interrupted construction projects. Indian suppliers are often demanding 100% upfront on costs to east coast retailers, again showing the distrust. Almost total attention has been given to banks and credit markets and stock markets. The US Economy is moving from recession toward something different from depression. The current interruption could actually be more like disintegration. Short-term credit is soon to interfere greatly with truckers and railways in distribution channels on the domestic side, much like letters of credit are wrecking havoc on the overseas shipper side.

Labels: Dollar, meltdown, US Economy

U.S. has plundered world wealth with dollar: China paper

The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.The People's Daily is the official newspaper of China's ruling Communist Party. The Chinese-language overseas edition is a small circulation offshoot of the main paper. Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis. "The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University."The U.S. dollar is losing people's confidence.

The world, acting democratically and lawfully through a global financial organization, urgently needs to change the international monetary system based on U.S. global economic leadership and U.S. dollar dominance," he wrote. Shi suggested that all trade between Europe and Asia should be settled in euros, pounds, yen and yuan, though he did not explain how the Chinese currency could play such a role since it is not convertible on the capital account.

Labels: China, Dollar, US Economic Meltdown

Analysis: Blame the dollar - by Massoud Hedeshi

According to the US Federal Reserve, the dollar has dropped by around 65 per cent against the Euro, 31 per cent against the British Sterling, 45 per cent against the Canadian Dollar, and by 59 per cent against the Australian Dollar over the eight-year period since June 2000. As America struggles to avoid recession, the world economic order appears to be heading for a drastic overhaul. Despite a trend by some economists and politicians to blame the current food and energy commodity price hikes on Opec or overpopulation, there is a clear picture emerging of deep structural problems in the world economy.

Ironically, the inevitable dumping of the US Dollar is not such good news for the EU in the long run, as the continuing rise of the Euro is detrimental for the continent's exports, and will weaken European manufacturing almost as rapidly as the Euro's rise. Furthermore, reliance on the services sector is no solution either, as rising global prices coupled with the rise of the Euro reduce demand for luxuries-oriented European goods and services - such as designer goods and tourism - even harder.

Labels: Dollar, US Economy

The Exaggerated Fuss over U.S. Dollar Devaluation?

European governments insist that the U.S. devalue the dollar by raising the official $35-per-oz. price of gold. The U.S., just as adamant, is opposed to such a move. It demands that the Japanese and Europeans revalue—that is, make their currencies costlier in terms of the dollar.It is an Alice-in-Wonderland dispute. What would be the difference between a currency realignment accomplished by 1) foreign revaluations alone or 2) U.S. devaluation combined with inevitable foreign revaluations? "Economically, it doesn't matter two hoots," says Yale's Robert Triffin. Either way, the end result would be the same: the dollar would buy fewer yen, marks, guilders and other strong currencies. Theoretically, it is true, U.S. devaluation would also make the dollar worth less in terms of Brazilian cruzeiros, Chilean escudos, Indonesian rupiahs and 100-odd other weak or minor currencies.

Labels: devaluation, Dollar, World Economy

Iran No Longer Accepts U.S. Dollar In Oil Trade

Iran is no longer accepting U.S. dollars for purchases of its oil and is selling the commodity in the world market only in euro and yen. Cbsnews.com quoted Iranian Oil Ministry official Hojjatollah Ghanimifard as saying on Wednesday, "The dollar has totally been removed from Iran's oil transactions. We have agreed with all of our crude oil customers to do our transactions in non-dollar currencies." The official said that Iran is selling oil to Europe in euro and to Asia in yen. Iran decided to abandon using the dollar because the depreciation of the U.S. currency is eating away the country's foreign currency reserves.

Labels: Dollar, euro, US Economy

The US Economic Demise: It's the Dollar, Stupid - by Judy Shelton

Has the U.S. forever given up on the dream of a rules-based monetary order for a global economy dedicated to free trade? Have we abandoned all sense of duty associated with providing the world's key reserve currency? These days it's easy to forget that, during the Great Depression years leading to World War II, floating exchange rates were not considered the free-market approach to currencies. They were considered the antithesis of global monetary order. Whereas the international gold standard guaranteed a level playing field in the trade arena, facilitating market-based outcomes among well-intentioned competitors in an open global marketplace, a nation that devalued its money against gold -- i.e., floated its currency -- was considered to be cheating.

Is it possible to defend the existing, do-your-own-thing approach to currency relations, which undermines stable trade and capital flows at the expense of global prosperity? Meanwhile, foreign-exchange market specialists earn big profits by gambling -- some $3 trillion daily -- on where currencies might go next.

Labels: Dollar, Exchange Rates, Gold standard, US Economy

Dollar's plunge pushes eurozone past US, Goldman Sachs says

The dollar's plunge has made the eurozone the world's biggest economy by one measure and has underscored shifts that are reorienting the 15-nation bloc towards Asia, Russia and oil-rich Gulf states, analysts say. "With the euro now trading around 1.56 against the dollar, the size of its annual output (at market value) has exceeded that of the United States," US investment bank Goldman Sachs estimated last week. "Brief as the development may prove to be, European policy makers will no doubt derive some pride" from the event, it said. The single European currency has skipped from record to record amid fears the US economy is heading into recession at a time of national housing and financial crises.

Interest rates have been cut in the United States to spur business activity, while the European Central Bank (ECB) has kept lending rates steady owing to concern over eurozone inflation that hit a record of 3.3 percent last month. Meanwhile, the economy of 320 million people -- which churns out 15 percent of global gross domestic product -- has slowed but shown a degree of resiliency to the US slump that few would have counted on just a few years ago. Historically thrifty German consumers helped the national retail sector gain 2.7 percent in January, with the trend continuing in February according to the HDE sector association.

Labels: Dollar, EU, euro

EURO versus DOLLAR: Iraq, the US trump to avoid a dollar collapse - by Alberto Cruz

With an exchange rate over US$1.51 against the Euro and a continuing depreciation against the Yen, the dollar is close to collapse. This is a theory that has been repeated for some time now (1) although it doesn't mean we are in the twilight of the current economic system nor in the antechamber of a crisis in capitalism's nerve centre. But we are witnessing a progressive weakening of the United States and this provokes movement, sometimes small but still significant, in what is really important : the progressive reduction of various countries' dollar reserves (right now 64.8% of the world's monetary reserves are held in dollars) and their transfer into other stronger currencies like Euros or Yen. That means fewer dollars in circulation and less financing for the US external debt of about 9 trillion dollars. In fact the dollar as the main currency for international trade and as the main reserve currency for different countries' Central Banks has lost almost 7 percentage points since 1999, dropping from 71% of all reserves that year to the current 64.8% now, which indicates that more and more countries are reducing their dependency on the US currency.

For the US to staunch this constant financial bleeding only one life raft remains : Iraq. That means increasing oil production in that country at all costs, ensuring its definitive return to OPEC on the same terms as OPEC's other members - since Iraq was paralyzed by the UN during the government of Saddam Hussein following the sanctions the country was subjected to - and above all, with Iraq's presence, reinforcing Saudi Arabia, which is under more and more pressure from the oil cartel's other member countries to stop using dollars as the only currency for oil transactions. When Ahmadinejad and Chavez made their proposal, the Saudis were the most reluctant to accept it or even to discuss it and managed to avoid even a tangential reference to the issue in the final declaration of that OPEC summit. But the reality is much more obstinate. Maintaining the alliance with the US is ever more costly in political and economic terms. In Saudi Arabia current inflation rates are the highest since 1980, running currently at 7%. In the United Arab Emirates, inflation is even higher at 9.3%. (3) The reason is none other than the weakness of the dollar in economies completely dollarized as those countries' are. That is what has led the Saudis finally to let their arm get twisted and to accept now a discussion about the dollar in the terms proposed by Venezuela and Iran.

Labels: Dollar, EU, euro, Iraq, Oil, Opec

US Fed needs global watch - by S.Gurumurthy

As per IMF data (2006) over 65 per cent of global forex reserves, (even 70 per cent plus in non-Euro areas) 41 per cent of global loans and 48 per cent of global deposits are held in dollar terms; 57 per cent of the US Treasury securities are held by Asian nations and 21 per cent by European nations; 53 per cent of US equities are held by Europeans, 26 per cent by Western hemisphere nations, 18 per cent by Asian nations. Bank of International Settlements reveals that 43 per cent of all forex transactions are in dollar terms. Identical is global trade in dollar terms. The OPEC sells oil only in dollars. That the dollar as a currency is more global than a national, and as a central bank US Fed is more a global than a US entity, are manifest in one single fact. Namely out of the dollar stock of $800 billion created by US Fed from its birth in 1913 till now, only less than a third of it circulates in the US and more than two-thirds is exported outside the US. How did the dollar come to play this central role? In 1950s, thanks to the Bretton Woods formula, the greenback officially became the global currency. But, after the formula collapsed in 1971, the dollar lost its official status. But, for lack of an alternative, it became the de facto global tender.Convinced that its model had won finally and egged on by powerful global corporates, the US went gung-ho on globalisation and liberalisation of its economy. It also began exerting pressure on others, by itself and also through WTO, IMF, World Bank and the rest, to liberalize on its terms.

EU-Digest:The global current account deficit of the United States is now larger than it has ever been nearing $800 billion, almost 7 percent of US GDP. To finance both the current account deficit and its own sizable foreign investments, the United States must import about $1 trillion of foreign capital every year or more than $4 billion every working day. The situation is unsustainable in both international financial and domestic political (i.e., trade policy) terms. Correcting it must be the highest priority for US foreign economic policy. The most constructive remedy in the short term is a three-part package that includes credible, sizable reductions in the US budget deficit, expansion of domestic demand in major economies outside the United States, and a gradual but substantial realignment of exchange rates.The foreign exchange value of the dollar has to substantially decline to make a serious dent in the record US current account deficit of nearly $800 billion, almost 7 percent of US GDP. Asian currencies that have not yet appreciated significantly against the dollar, especially the Chinese renminbi, will need to rise sharply. Asian and other central banks must cease intervening in the exchange markets and accumulating massive amounts of dollar reserves to permit the market to begin the needed exchange rate corrections. An Asian Plaza Agreement to coordinate exchange rate realignments in that region may be necessary given the reluctance of the individual countries to appreciate sharply and lose competitiveness.

Labels: Dollar, US, World Economy

The Epic Battle over Crude Oil and the US$ - by Gary Dorsch

Why are Ahmadinejad and Chavez laughing? Oil prices are up 56% this year, after nearly reaching $100 per barrel. At the same time, the US Dollar is mired at a 20-year low, with the US economy teetering on the verge of a recession. The US dollar has fallen over 50% versus the Euro since 2002, and oil prices are nearly five times higher over the same time period. Increasingly, the US dollar’s reserve currency status is looking very fragile. Perhaps, all that’s left supporting the greenback is America’s military might. “They get our oil and give us a worthless piece of paper,” Ahmadinejad told OPEC ministers in the Saudi capital of Riyadh, insulting the US dollar.The Federal Reserve has allowed the MZM money supply to expand by $850 billion this year, up 13% from a year ago. The broader US M3 money supply is 15.8% higher, it’s fastest in history, monetizing the prices of crude oil and gold, key hedges against inflation, to all-time highs.

Explaining the Fed’s reason for ignoring sharply higher food and energy prices, on October 20th, Federal Reserve governor Frederic Mishkin said, “Changes in price indexes without food and energy provide a clearer picture of underlying inflation pressures. If the monetary authorities react to headline inflation numbers, they run the risk of responding to merely temporary fluctuations,” he said. At the same time, Mishkin said it was the Fed’s job to “counteract negative shocks to the economy,” from high oil prices, suggesting a further expansion of the money supply.

Clearly, the US Treasury expects a quick fix to the Global “Oil Shock” from King Abdullah to cap global oil prices, by boosting Saudi oil output next month. That would permit the Fed to lowers its lending rates and inject more dollars into the hands of Wall Street dealers, while keeping the “crude oil vigilantes” at bay. But a move by the Saudis to knock oil prices lower could also inflict damage on its own stock market, which is just starting to shake off a nasty two year hangover.

Labels: Dollar, EU, euro, Oil

US Recession? U.S. Economy: Manufacturing Grows at Slower Pace - - by Courtney Schlisserman

Manufacturing in the U.S. grew in November at the slowest pace in 10 months as the housing slump pushes the economy toward recession. The Institute for Supply Management's factory index fell to 50.8, matching economists' forecasts, from 50.9 the previous month, the Tempe, Arizona-based group said today. Fifty is the dividing line between contraction and expansion.

Labels: Dollar, recession, US Economy

Dollar-Rebound May Be Imminent, Should U.S. Slowdown Hit Global Economy ?

According to analysts, the dollar may be set for a rebound after having hit record lows against the Euro and other major currencies recently. The decline of the greenback has been unrelenting this year with the U.S. currency down 5 percent against the British pound, 7 percent versus the yen, a whopping 10 percent against the single currency, and 14 percent versus the Canadian dollar. Maurice Obstfeld of the University of California at Berkley and Kenneth Rogoff of Harvard University tabulated in 2005, that the dollar would need to decline as much as 30 percent against the Federal Reserve's trade-weighted basket of currencies to balance the U.S. trade deficit, now tagged at more than 6 percent of the nation's economic output.

According to that theory, the dollar would have to drop another 20 percent, before it hits rock bottom. But some analysts say currency markets are difficult to predict, and there is an argument to be made that the dollar could bottom-out in the near future.

Labels: Dollar, recession, US

The Dollar-Fifty-Six Euro

"When some Americans travel to Europe these days, they are shocked at the anti-American (or more precisely, anti-Bush) attitudes expressed by the Europeans. Me, I'm used to that sort of thing, so when I heard such sentiments on my recent vacation, they didn't surprise me much. But what did shock me was the airport currency exchange counter. To buy one Euro on the day I arrived, it cost me $1.56. This hasn't happened yet, but signs are pointing to other countries at least considering this sea change. In 2007 the Euro has hit a new high as a percentage of the world's reserve currency (25.6%), but although the dollar has dropped a bit from its high of around 71%, it's still a comfortable 64.8% which is not even at the low of 59% reached in 1995. The Euro, in other words, still has a long way to go before it replaces the dollar in the world's bank vaults."

The strangest manifestation of the weak dollar in Europe right now is the hordes of European shoppers coming to America (New York City, mostly) to do their Christmas shopping. While some are Euro-yuppies who are buying foreign goods for their chic value (the same way we buy European products because they're "cooler" than American products), many are simply looking for a bargain.Is this to be America's future? Bargain basement to the world?"

Labels: Dollar, EU, euro

The Euro vs. Dollar double gambetto for high tech corporations - "STRONG EURO IS GOOD FOR EUROPE"

"In chess, a gambetto - say it with an Italian accent, consists in sacrificing a piece at the beginning of a game to gain a competitive position on the exchequer - for example through the control of the center of the chessboard or one of the long diagonals. Getting back to business (we’ll get back to the gambetto later), it is very common to say that the state of an economy is reflected by the strength of its currency when the Euro currency is weak - and hence that the economy of the EU are in poor shape. However, when the Euro gets stronger, companies and officials claim that corporations are constrained in their efforts to export goods and services and that the situation should be reversed or the EU will soon enter an economic turmoil. I think this is all too easy and bullshit."

"God Dollar used to be the only viable currency in international trade, until the Euro came out of nowhere in January 2000 (2001 for actual pocket coins and bills). The European Union is the world’s largest consumer market, and a gateway to the Middle East and Africa for American companies. Although the Dollar still dominates international transactions of goods (slightly) and financial transactions (easily), the Euro has emerged as a tangible alternative considering the political stability of the region. Consequently, the Euro vs. US Dollar exchange rate has kept growing insanely from 1 EUR = USD 0.85 in mid 2000 (1 EUR = 1.19 USD on January 1st 2000) to 1 EURO = USD 1.47 USD today. Althoug I acknowledge the trickiness of the situation for export businesses, high tech or not, I see very few corporations have implemented hedging strategies or make proper use of forward contracts - which is a shame."

Labels: Dollar, EU, euro

Iran virtually free of U.S. dollar in oil revenues

Iran, at odds with the West over its nuclear programme, has effectively cut all ties with the dollar when it comes to oil revenues, a top Iranian oil official said on Monday. For nearly two years, OPEC's second biggest producer has been reducing its exposure to the dollar, saying the weak U.S. currency is eroding its purchasing power. Tehran is now fetching roughly $87 a barrel on daily crude sales of 2.4 million. Ghanimifard said less than 20 percent of Iran's oil export earnings are in yen and the rest in euros.
He explained that NIOC is receiving more than 80 percent of its payment for crude in currencies other than the dollar.The Islamic Republic and Venezuela made clear before and after the summit they would press for action, which could include pricing oil in a basket of currencies.

Labels: Dollar, euro, Iran

EURO - Dollar losing currency among Opec nations

With the rise of the euro, the appeal is to using a basket of currencies and, of course, the dollar's steady slide over the past few years, using the US currency to price oil is falling out of favour. At least that is what what Venezuela's Energy Minister Rafael Ramirez told reporters last Friday."The need to establish a basket of currencies... will probably be a point of discussion in the next Opec summit," Reuters reported Ramirez as saying.

Labels: Dollar, EU, euro, Opec

Euro rampant as dollar sags on more losses

The dollar sank to a new low against the euro on Thursday as fresh evidence of losses in the mortgage industry stoked fears of a sharper-than-expected economic slowdown in the U S and crude oil rose to another record. In late afternoon trading in New York, the euro traded at 1.4294, up from 1.4186 on Wednesday. Crude oil for November delivery rose 2.07, or 2.4% , to 89.47 a barrel. In after- hours electronic trading, the price rose slightly above 90.

The declining dollar has made commodities, which are priced in dollars, more attractive as investments, while tensions between Turks and Kurds over border violence in northern Iraq have helped keep oil prices rising.

Labels: Dollar, euro, World Economy

World Economy - Why a Weak Dollar Hurts U.S. Manufacturers - by Peter Schiff

The vast majority of economists are currently hailing the freefall of the dollar as a windfall for American business. While some domestic manufacturers may enjoy some initial benefits from a weaker dollar, they will ultimately suffer many adverse consequences as well. More importantly, the dollar's demise is a disaster for American consumers. A cheaper dollar helps domestic manufacturers because it makes local costs, such as wages and rents, decline in relation to the costs borne by international competitors. While this is true, it also means that American workers and landlords see a corresponding decline in the real values of their pay and rent. Given that such declines negatively impact living standards, such developments hardly seem worth celebrating. Too often overlooked however is how the weakening dollar also works to increase costs for domestic manufacturers. A falling dollar raises the costs of raw materials, such as oil and metals, while simultaneously decreasing the relative costs that foreign competitors pay for the same supplies.

But it is not just raw materials prices that rise. Perhaps even more important will be the prices of foreign-made components that are used in American factories.

Labels: Dollar, US Economy, World Economy

Dollar tumbles to new low against the euro after Fed's half-point rate cut

The dollar fell against almost all major currencies and hit a record low against the euro Tuesday after the Federal Reserve made an aggressive half-point cut in a key interest rate. The euro rose as high $1.3979 after the long-awaited decision before settling back to $1.3971 in late New York trading, up from 1.3867 Monday. The dollar fell against the pound, too. The British currency bought $2.0131 in New York trading, up from $1.9939 Monday.

Labels: Dollar, EU, euro, USA

Dollar Trades Near Record Low Versus Euro on Fed Rate Cut Bets: Lukanyo Mnyanda and Ron Harui

The dollar traded near a record low against the euro after Federal Reserve officials signaled the need for interest-rate cuts, eroding demand for dollar- denominated assets. The U.S. currency fell for a fifth day, its longest slide in three months. Fed Governor Frederic Mishkin and Fed Bank of San Francisco President Janet Yellen said yesterday credit-market losses may slow growth, while a government report last week showed the economy unexpectedly lost jobs in August.

Labels: Dollar, EU, euro

Dollar continues plunge in Europe, Canada

Travel for Americans in Europe and Canada is getting more expensive by the day, as the U.S. dollar continues to sink to record lows. The euro soared to an all-time high, topping the $1.37 mark. The British pound, which has been trading around 26-year highs against the dollar, touched $2.03, and the Canadian dollar, at 94.5 cents, is worth 11 percent more than it was a year ago. Business analysts blamed U.S. economic policies, as homebuilders and retailers lowered their forecasts, causing concern about the housing market and the economy in general. "The dollar is a basket case," said Peter Schiff, president of Euro Pacific Capital Inc. Given the state of the U.S. economy, he said, the dollar could continue to fall in the coming years against the euro to $2.50 or even $3

Labels: Dollar, euro, US Economy

Dollar Crash - Is the puny dollar a sign of America’s decline? - Anatole Kaletsk

Yesterday, the pound and the euro hit their highest levels in a generation against the US dollar. The dollar, meanwhile, collapsed to a record low against an average of all the world’s major currencies. It is tempting to interpret the flight from the dollar in financial markets as the clearest, most objective, indicator of America’s relative decline.

Europe has long been derided as an ageing, sclerotic continent, doomed to irrelevance in a world dominated by America and Asia. But could it actually be America, not Europe, that is failing to compete in the globalised world economy and is now threatened with long-term decline?

Labels: Dollar, EU, euro