Hi Steve:
Looks like Euro is rising steadily to more reasonable level.
Today 0.894 from 0.82 two weeks ago, but still lower then 0.95 in June.
This should be good of US companies eps.
Oil below 30, and with more inventory increase in crude and heating the trend is quite good.
I would not be surprise to see 0.25% cut in December, specially if Friday job data will be soft. CPI and PPI should be fine.
Zbyslaw
12/07 06:00
Euro Climbs to 11-Week High as Growth Gap With U.S. Shrinks
By Tom Kohn
London, Dec. 7 (Bloomberg) -- The euro rose for the eighth day in nine against the dollar to an
11-week high, amid signs the U.S. economy is slowing relative to Europe's, prompting investors
to shift money to the euro region.
The euro rose as high as 89.69 U.S. cents, the strongest since Sept. 22, from 88.96 in London
yesterday. It has advanced 6.6 percent in the past 10 days. Against the yen, one dollar bought
110.37, compared with 110.43 yen yesterday. The euro rose to 98.91 yen from 98.22.
``Investors are becoming more reluctant to buy dollar assets,'' said Adrian Cunningham, who
helps oversee 20 billion pounds ($29 billion) at Abbey National Asset Managers in Glasgow.
``There are downgrades of European growth expectations, but they're nothing like as drastic as
the U.S.''
Cunningham predicts the euro will rise to 92 cents in three months and $1.00 in 12 months.
The Federal Reserve said yesterday in its latest report the U.S. economy expanded at a slower
pace in November. The Fed will use the report, its so-called beige book, at its next policy meeting
Dec. 19.
Germany, Europe's biggest economy, reported manufacturing orders rose in October by more
than twice economists' forecasts yesterday. It said today industrial production rose 4 percent in
the year to October, though fell 0.3 percent in the month.
``The euro will keep rising as investors, who had heavily invested in the U.S., take out some
funds and place them in the euro zone,'' said Takayuki Togawa, a foreign exchange manager at
Tokai Bank Ltd. in Tokyo. He expects the euro to rise to 93 cents through the end of this month.
Disparity
Economic growth in the U.S. will probably slow to 3.5 percent next year from 5.2 percent in 2000,
the Organization for Economic Cooperation and Development said in its economic outlook report.
For the euro zone, it forecasts 3.1 percent growth in 2001, compared with 3.5 percent this year.
Foreigners sold a net $8.5 billion of U.S. bonds in September, according to the latest U.S.
Treasury figures, more than the $114 million they sold in August.
The U.S. currency will fall further if the government releases weaker-than-expected monthly jobs
figures for November tomorrow, analysts said.
Economists surveyed by Bloomberg predict unemployment rose to 4 percent last month from 3.9
percent in October, a 30-year low first reached in April.
``I wouldn't be surprised if we see quite a sluggish report, consistent with the picture that the U.S.
is slowing,'' said Simon Rubinsohn, chief economist at Capel-Cure Sharp, who helps oversee
9.5 billion pounds. Still, ``if there's a half-decent employment report on Friday, we may see the
dollar enjoy a bit of a recovery to the 87 area.''
`Reasonable'
The euro benefited the most among three major currencies for the past week. It has gained more
than 2 percent against the yen and the dollar.
``The euro is the currency which we all consider the most reasonable currency to buy,'' because it
lost more than 30 percent of its value since its January 1999 inception, said Tomoyuki Kawakami,
deputy general manager for trading division at Shinsei Bank Ltd. in Tokyo.
Kawakami said the euro could rise to 90 cents from the 89.10 level it recently traded.
In the U.S., the Nasdaq Composite Index plunged 3.2 percent, reflecting broader prospects for a
decline in corporate earnings. Apple Computer Inc. said it expects to lose money in the quarter
ending this month and Bank of America Corp. said its profits for the fourth quarter and next year
will disappoint investors.
We're ``in a stage where capital flows to the U.S. will start declining,'' said Mitul Kotecha, global
head of currency research at Credit Agricole Indosuez, on Bloomberg TV. ``It will be beneficial to
the euro, given that most came from Europe in the first place.''
For the past two weeks, dollar has fallen to near 110 yen every day, then rebounded, climbing as
high as 112.05 on Dec. 1, according to the Electronic Broking Services Ltd.
``The 110 yen level is a great level to buy the dollar,'' said Hideyuki Tsukamoto, a foreign
exchange manager at Fuji Bank Ltd.
In further evidence Japan's economy is weak, the government said the nation's household
spending, which makes up about 60 percent of economic activity, fell 0.2 percent in October from
a month earlier.
Meanwhile, European Union leaders begin a three-day summit in Nice, France to conclude
France's presidency of the EU. Sweden takes over the rotating six-month presidency on Jan. 1.
Investors bought a net $70 billion of euro area bonds and notes in the first three quarters of 2000,
compared with the first three quarters of 1999, when they sold bonds worth $42 billion, according
to European Central Bank figures. Still, there was a net outflow of total investments of $80 billion
in the first nine months of this year, the ECB said. |
