# Is the $ slide the start of a collapse?



## Wilkes (5 Dec 2006)

The Dollar, unsupported by a gold link, has been printed in vast quantities by the US in the form of Treasury Stock and essentially backed by cheap oil propelling the US economy for several decades. But the sheer scale of US debt from import/ export imbalance to low cost Asia, the Govt deficit and huge private sector credit means that this part of the world is awash with borrowings. These have to repaid. Meanwhile capital markets are awash with borrowed money in hedge funds.

I'm not trying to be a pessimist just a realist but with oil and gas either past peak or heading shortly there, the era of cheap energy is coming to an end and alternatives are just not dense or efficient enough to meet growing global demand. At best it's beginning to feel like a prolonged phase of double digit inflation around the corner.

Does anyone have or know of good independent contradictory analysis. I'd love to read the positive stuff!


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## room305 (5 Dec 2006)

Very little positive stuff around but have a look at this thread:



Some people (myself included) think we will see deflation before double-digit inflation.

Neither is particularly good for the US (and consequently the world) but I'd bet given a choice Bernanke would choose the latter.


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## edo (5 Dec 2006)

Interesting viewpoint from This mornings CIF in the Guardian

http://commentisfree.guardian.co.uk/james_k_galbraith/2006/12/the_dollar_melts_as_iraq_burns.html

Same vaguely pessemistic outlook - the dollars in trouble but whats the alternative.

Sounds like ourselves looking at the next general election

PS: if you read down the article in to the "comments" section - some really interesting and provocative replies - especially in connection with the formation of a new world currency or breaking the dollars link with the US economy!


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## baby_tooth (5 Dec 2006)

edo said:


> Interesting viewpoint from This mornings CIF in the Guardian
> 
> http://commentisfree.guardian.co.uk/james_k_galbraith/2006/12/the_dollar_melts_as_iraq_burns.html
> 
> ...


 

as much as some ppl would love for this to happen, esp america itself, nope, too many large extrnal countries carrying dollar.
china have sh£t loads of the stuff....

short term fall...rally and drop again...

will pull back by end of 2007...


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## plaudit (6 Dec 2006)

the dollar is fine. Its a good carry trade at the moment. Unless $ rates fall significantly it will be ok.


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## StoppedClock (6 Dec 2006)

plaudit said:


> the dollar is fine. Its a good carry trade at the moment. Unless $ rates fall significantly it will be ok.


 

Can you explain why this will be the case, I would like to understand it more?


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## room305 (6 Dec 2006)

plaudit said:


> the dollar is fine. Its a good carry trade at the moment. Unless $ rates fall significantly it will be ok.



Not necessarily. This dollar weakness, based mainly around the prospect of the Fed cutting rates, is preventing the Fed from doing so. A soft dollar doesn't bother the Fed as it lowers the real cost of their debts but they cannot risk the prospect of a run on the dollar. The weaker the dollar the greater the likelihood of a hard landing for the US economy IMO.

Please explain how a US dollar carry-trade would work - they have higher interest rates than Europe or Japan, so I don't follow.


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## plaudit (6 Dec 2006)

room305 said:


> Please explain how a US dollar carry-trade would work - they have higher interest rates than Europe or Japan, so I don't follow.


 
Buy USD/JPY and get a ~4.5% yield.


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## Duplex (6 Dec 2006)

plaudit said:


> Buy USD/JPY and get a ~4.5% yield.


 
I cant see how the yen- dollar carry trade supports the strength of the dollar.  I think the inverted yield curve in dollar bonds tells you all you need to know about sentiment towards the dollar.  The bond markets are saying that the US is heading for recession and that the Fed will drop rates again = weak dollar.


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## plaudit (6 Dec 2006)

Nobody knows for sure. This time 2 years ago the Euro was destined for €1.40 and it went under $1.20. Look at NZ$, it was supposed to be in freefall but did a U-turn in the last 6 months


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## Duplex (6 Dec 2006)

plaudit said:


> Nobody knows for sure. This time 2 years ago the Euro was destined for €1.40 and it went under $1.20. Look at NZ$, it was supposed to be in freefall but did a U-turn in the last 6 months


 
I think that the actions of hedge funds and currency speculators are poor indicators of what is likely to happen in the real economy.  And what is happening in the US's real economy will be the principle determinant of the relative strength or weakness of the dollar.


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## Chamar (6 Dec 2006)

Anybody who makes predictions about currencies are just guessing. They are notoriously unpredictable.


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## plaudit (6 Dec 2006)

Every plane from Shannon, Dublin, London and every other European city is packed with people flying to the States bargain hunting, companies are buying US produce and carry traders are holding it, they are all supporting it. The dollar has already weakened, interest rate reductions have been priced in, European rises have been priced in, anything can happen.

If ye don't like the us$ then try a nice carry basket thats US$ neutral buy NZD/USD and AUD/USD and buy USD/JPYand USD/CHF etc, it pays more like 6%.

Remember comical Austin told us European rises are "done and dusted"


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## edo (6 Dec 2006)

a couple of interesting articles from newsweek -firstly the dollar situation

http://www.msnbc.msn.com/id/16012016/site/newsweek/

and also a rather unusually bullish article on Europe and the Euro - makes a pleasant change from the normal euro trashing that emanates from the other side of the Atlantic.

http://www.msnbc.msn.com/id/16006859/site/newsweek/

just emphasises the feeling I have had for a while now that Europe is getting its act together.


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## walk2dewater (6 Dec 2006)

Chamar said:


> Anybody who makes predictions about currencies are just guessing. They are notoriously unpredictable.


 
We're ALL guessers my friend, thats life.


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## phoenix_n (6 Dec 2006)

"The idea for the next few years for Venezuela to sell all the crude oil it presently shipping to the US to the Chinese instead," 

This would have a serious impact on the dollar aswell.


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## Duplex (6 Dec 2006)

phoenix_n said:


> "The idea for the next few years for Venezuela to sell all the crude oil it presently shipping to the US to the Chinese instead,"
> 
> This would have a serious impact on the dollar aswell.


 
As will the Iranians shifting from the dollar to the euro.   
http://www.bloomberg.com/apps/news?pid=20601082&sid=a616zL9v6It0&refer=canada


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## Persius (6 Dec 2006)

> Although the euro has climbed by 11 percent compared with the dollar since the beginning of this year, its value against a trade-weighted average of its 23 most important trading partners' currencies—including the British pound and the Japanese yen—has increased by just 5 percent. (Indeed, late last week the British currency hit its highest level against the dollar in 14 years.)


 
From the MSN article on the Euro. I guess this is good news for Ireland. As we export alot to the UK, strength of the pound will hopefully ofset some of the effects of dollar weakness wrt the Euro.


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## Savvy (7 Dec 2006)

I think the Euro has been hovering around the 65-70p level for a couple of years now.


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## plaudit (8 Dec 2006)

The US Treasury Secretary said today that "a strong dollar is in the interest of our county" ahead of his visit to China. The € dropped 1.5c after that comment. Trichet said yesterday that volatile exchange rates were unwelcome. This is probably the end of the slide for a while.


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## Sidewinder (8 Dec 2006)

Persius said:


> From the MSN article on the Euro. I guess this is good news for Ireland. As we export alot to the UK, strength of the pound will hopefully ofset some of the effects of dollar weakness wrt the Euro.



Actually, these days the US and the UK are of equal importance with about 20% of Irish trade each, the rest of the EU with about 45% and 15% to the rest of the planet. We've come a long way in terms of diversifying our trade since the early 80s when about 70% of all our trade was with the UK alone.


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## plaudit (5 Jan 2007)

€/$ now back to 1.30.


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## Persius (5 Jan 2007)

Most of the predictions for 2007 that I've read so far are predicting a further fall in the dollar relative to the Euro as the year progresses. I guess we'll just have to wait and see how it develops.


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## Howitzer (5 Jan 2007)

I read a pretty good article in last Sundays Times which took the opposite view, that the $ fall has been oversold and that the end of 2007 will see a $1.20 price. I'll post the link if I find it.


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## phoenix_n (17 Jan 2007)

Looking into buying some stock on the Nasdaq but am concerned with the current rate of exchange. (or more correct; the future rate of exchange)

Any good resources that someone here can point me to as to possible movements of the dollar against the euro.


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## Guest109 (17 Jan 2007)

today in buttercrane newry for £100 i got 150 euro,s i think this is the most i ever got, so its on the slide against sterling has been this long time also


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## Sidewinder (18 Jan 2007)

ainya said:


> today in buttercrane newry for £100 i got 150 euro,s i think this is the most i ever got, so its on the slide against sterling has been this long time also



Nah, that's a rate of €1: £0.66. The Euro/Sterling rate has been bouncing around between 0.66 and 0.69 for the last 3-4 years. Nothing particularly new there. Though Sterling will probably stay at the high end of that range for the next 12-18 months for technical reasons as the world's central banks try to quietly offload dollars. The money has to go somewhere during that process. STG£, CAN$, CHF, HK$, OZ$ and possibly Yen will all be bought up in large amounts, along with gold.

It can't last though because there's just waaay too many dollars out there for the other major currencies and resources to take up the slack.


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## phoenix_n (18 Jan 2007)

Any predictions ( i know predicting exchange rates is a fools game ) on where say the euro/dollar exchange rate will be in say 6 months time ?


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## charttrader (18 Jan 2007)

phoenix_n said:


> Any predictions ( i know predicting exchange rates is a fools game ) on where say the euro/dollar exchange rate will be in say 6 months time ?



If you 'know' it's a fool's game, why ask?


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## Sidewinder (18 Jan 2007)

charttrader said:


> If you 'know' it's a fool's game, why ask?



Bragging rights for the winner? Bit of fun?

I wouldn't expect a large slide in the dollar till Q407/Q108. For the rest of 07? Ummmmm.....

*pulls numbers out of air*

A slow 7-10% depreciation trend with lots of ups and downs, dead cat bounces, suckers rallies and general confusion. Followed by a sudden 15-20% correction, then another year of confusion but trending down another 10% or so.

All of the above is based on absolutely nothing at all and should not be used by anyone sane in making investment decisions. What do I win if I'm right?


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## phoenix_n (18 Jan 2007)

charttrader said:


> If you 'know' it's a fool's game, why ask?


 
Thanks for your contribution.


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## charttrader (18 Jan 2007)

phoenix_n said:


> Thanks for your contribution.



I was not being sarcastic, I'm trying to make a point.

You said you wanted to invest in a Nasdaq stock but were worried about currency fluctuations and wanted to know where other posters believed the dollar was headed - despite the fact that you 'know' this is a fool's game.  This is an obvious contradiction.

You have a number of choices.  
1- You could open a spread betting account, where currency fluctuations are not an issue (however, your stock may not be available to bet on).  
2 - You could invest in your stock and hope that currency movements do not impact you negatively.  After all, if you genuinely believe that its movements are unknowable, then there is a much chance as you gaining from them as there is losing from them.  
3 - If you think the risk is too great, don't invest in US stocks.

If your interest in euro/dollar movements was a matter of simple intellectual curiousity, I would not have commented.  However, you seem to be looking for predictions to guide you in your investments, despite the fact that you denounce this as a fool's game.  It just doesn't make sense.


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## phoenix_n (18 Jan 2007)

charttrader said:


> I was not being sarcastic, I'm trying to make a point.


A point that i had already made so i was looking for predictions disregarding how difficult and foolish it may be. If i had asked the question in a bar etc your retort would not have been helpful to say the least. I dont see why an internet forum should digress from normal manners.



charttrader said:


> You have a number of choices.
> 1- You could open a spread betting account, where currency fluctuations are not an issue (however, your stock may not be available to bet on).
> 2 - You could invest in your stock and hope that currency movements do not impact you negatively. After all, if you genuinely believe that its movements are unknowable, then there is a much chance as you gaining from them as there is losing from them.
> 3 - If you think the risk is too great, don't invest in US stocks.


Thanks.



charttrader said:


> If your interest in euro/dollar movements was a matter of simple intellectual curiousity, I would not have commented. However, you seem to be looking for predictions to guide you in your investments, despite the fact that you denounce this as a fool's game. It just doesn't make sense.


 
Can someone predict how the currency may do. No not really. But people can make informed guesses. And that is what i was looking for.


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## charttrader (18 Jan 2007)

_I dont see why an internet forum should digress from normal manners.
_
Phoenix, I already said I wasn't being sarcastic - no offence was intended. To repeat, I was making a simple point.

So as not to distort this thread, this will be my last remark on the matter.


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