Just wondering what everyone thinks of this, especially the comments towards the end regarding Germany and France. Can we assume France will try to weaken their currency (print) and there will be a battle of CB's competing to devalue. Good for silver and gold long term.
Posted on Sat, Mar. 01, 2008
Dollar's continued fall worries euro countries
By Matt Moore - The Associated Press
BERLIN --
The dollar kept spiraling down Friday, hitting another low against the euro and dropping to a three-year record against the yen, as worries about the U.S. economy depress the currency and raise thorny issues in Europe about how to cope with the growing gap.
The euro flew past its previous high to hit $1.5238, before subsiding to $1.5194 late in New York. The euro topped $1.50 this week for the first time since being introduced in 1999 at $1.17, then surged above $1.51 after markets took comments from Fed Chairman Ben Bernanke as a sign that yet more U.S. rate cuts are on the way.
"The dollar looks set to finish the month with yet more downside pressure being heaped upon it," said Gary Thomson of CMC Markets in London.
The dollar also slumped to 103.96 Japanese yen on Friday from 105.36 yen in New York the night before. The dollar has not been below 104 yen since March 2005.
The dollar also fell to 1.0433 Swiss francs from 1.0503 Swiss francs, hitting a record low of 1.0410 francs, according to Dow Jones' Interbank foreign exchange rates.
The two "carry-trade currencies" tend to trade inversely to the market. The Dow Jones industrial average dropped 315 points in New York on Friday.
Carry trading borrows currencies from countries with low interest rates and invests the funds in higher-yielding assets, such as the New Zealand dollar and the euro.
The 15-nation currency's looming ascent has some of the United States' large trading partners in Europe considering their options, and drawing two very different reactions: alarm from the French, equanimity from the Germans.
Germany's manufacturing giants are keeping an eye on the record-high euro but are also planning for the future, devising new strategies to mitigate the effect of the strong currency on their bottom line.
In France the concern is more palpable, with politicians calling for the European Central Bank to intervene to put the brakes on the euro's surge.
Planemaker Airbus has groused that for every 10 euro cents the common currency gains against the dollar, the company will lose as much as 1 billion euros ($1.5 billion) - and that adds up.
The euro zone's biggest companies, and some midsize ones, too, all practice currency hedging, which entails buying financial contracts on the open market to lock in exchange rates to avoid any pitfalls in the event of big swings. |
