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Strategies & Market Trends : Commodities - The Coming Bull Market
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To: Cogito Ergo Sum who wrote (726)8/22/2001 6:40:01 PM
From: craig crawford  Read Replies (1) of 1643
 
Investors to the Fed: More!
Greenspan's latest cut gets jeered by the markets. Too bad the dollar demise continues, complicating his bid to jump-start the economy
businessweek.com

DIFFICULT SCENARIO. All fine and good. Clearly, investors have ample reason to remain worried about the economic outlook, considering that growth barely budged last quarter and might not be doing much better this quarter. But the dollar sold off on Aug. 21 after the Fed's move. The greenback hit a five-month low against the euro and is now 10% below its 2001 high. Bill Gross, the manager of PIMCO, the world's largest bond fund, warned that the weakening dollar could cause a foreign stampede out of U.S. assets, adding to the economy's and market's woes.

Such a scenario would make life incredibly difficult for Fed Chairman Alan Greenspan and his central bank colleagues. The economy has been slower than usual to react to monetary stimulus this go-round, and the markets and Corporate America are clamoring for more rate cuts to goose it. Yet if the dollar continues to weaken, the Fed's hands could be tied when it comes to further easing. Or worse yet, the Fed could be forced to reverse course and raise rates in an effort to bolster the buck.
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