Weakness, weakness everywhere
Bloomberg relates a story of unrelenting woe for the dollar and a Hobson’s choice for the Fed:
“The trend of a weakening dollar will continue,” said Adam Boyton, a senior currency strategist in New York at Deutsche Bank AG, the world’s largest currency trading bank. “If the Fed doesn’t cut rates next month, the risk of a recession will rise considerably.”
The dollar traded at $1.4841 per euro and 109.97 yen at 7 a.m. in Tokyo. The U.S. currency touched $1.4852 yesterday, the cheapest level since the 13-nation currency started trading in January 1999. The U.S. currency fell 1.2 percent yesterday, the biggest decline since Jan. 23, 2006. The dollar also reached an all-time low of 1.1055 against the Swiss franc. The euro bought 163.16 yen. The dollar will decline to $1.50 per euro by the end of the year, according to Boyton.
The Fed cut its 2008 growth forecast to between 1.8 percent and 2.5 percent, from 2.5 percent to 2.75 percent…The New York-based Conference Board’s index of leading U.S. economic indicators probably fell 0.3 percent in October, after a 0.3 percent gain a month earlier, according to a Bloomberg News survey….
Currencies in New Zealand, the U.K., South Africa and Norway gained yesterday as the prospect of lower rates in the U.S. enticed investors away from dollar-denominated assets. The dollar also fell on speculation a group of six Arab nations will end their fixed exchange rates to the U.S. currency…The dollar has lost 11 percent against the euro, 7.6 percent versus the yen and 9.2 percent against the franc over the same period.
“The trend of dollar weakness has momentum,” said Tom Fitzpatrick, global head of currency strategy at Citigroup Global Markets Inc. in New York. “I won’t be surprised if euro dollar trades” at $1.50 per euro by mid-December. Over the past five years, the dollar has tumbled 50 percent against Brazil’s real, 38 percent against the Canadian dollar and 32 percent against the euro, prompting European Central Bank President Jean-Claude Trichet to say this week that “disorderly” currency moves are “undesirable.”