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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (3405)	12/15/2003 1:08:40 PM
From: yard_man	Read Replies (1) \| Respond to of 110194

>>If Gold hits 420, I expect eurodollars to be up big and that is exactly the opposite of everyone else's thinking here.<< why is that opposite most folks thinking -- eurodollars and gold up together makes sense to me ...

To: mishedlo who wrote (3405)	12/15/2003 1:43:04 PM
From: Haim R. Branisteanu	Respond to of 110194

EU, Bundesbank Say Euro Rate May Endanger Recovery (Update4) Dec. 15 (Bloomberg) -- The European Commission and the Bundesbank said a further appreciation of the euro risks hurting the region's economy, suggesting that policy makers are becoming more concerned about the currency's exchange rate. ``Past euro-area recoveries have generally been driven by exports in their early stages,'' the commission said. ``The recent renewed bout of weakness of the dollar, with the dollar-euro exchange rate climbing above 1.20, underlines the risks attached to this scenario.'' The Bundesbank said it sees the risk of a ``stronger'' dollar drop that would hurt growth. The euro's 23 percent climb against the dollar in the past year has eroded U.S. revenue at companies including Nokia Oyj and Volkswagen AG, threatening the euro region's export-led recovery from a contraction in the second quarter. The euro touched $1.2307 on Friday, according to EBS prices, the highest since the currency's introduction in 1999. The commission and the Bundesbank ``are maybe starting to get a little nervous at this stage,'' said Lorenzo Codogno, co-chief economist at Bank of America in London. ``It's interesting that their language is becoming clearer. The tone is shifting.'' The currency has gained partly on concern the U.S. will find it harder to attract foreign capital to offset the deficit in its current account, which reached a record $138.7 billion in the second quarter. `Risk of Disruption' ``Given persistently high financing requirements for the U.S. current account deficit there remains a considerable potential for abrupt exchange rate moves,'' the Bundesbank said in its monthly report. An ``overshooting'' in currency markets would create a ``significant risk of disruption'' to Europe's exports. The euro bought $1.2288 at 5:10 p.m. in Frankfurt, paring earlier losses after a report from the Treasury Department showed foreign governments and investors increased their holdings of U.S. financial assets by a net $27.7 billion in October. That followed September's net of $4.19 billion, which was the smallest gain in five years and pushed the dollar down against the euro. The Bundesbank also said it sees a ``risk'' for currency and exchange rate levels if Asian central banks were to scale back their participation in the U.S. bond market. European policy makers have so far given few indications that they are concerned about the euro's exchange rate. European Central Bank President Jean-Claude Trichet said earlier this month he favors a ``strong and stable'' euro and Bundesbank President Ernst Welteke said last week the stronger currency poses ``no serious competitive problem.'' Company Concerns Still, some companies are already feeling the pressure. Volkswagen, Europe's largest carmaker, said last month U.S. sales will drop ``significantly'' next year and the ZVEI industry group said today German sales of semiconductors will this year miss its own estimates because of the euro's increase. Europe's economy has been benefiting from rising global demand, which boosted exports even as the currency's gain made goods from the region more expensive. The U.S. economy, which buys almost one-fifth of the euro area's exports, will probably expand 4.4 percent next year, according to the median forecast of 62 economists surveyed by Bloomberg News. In Asia, Japanese business optimism rose to the highest since 1997 in the fourth quarter and Chinese industrial output grew at a record pace in November, reports last week showed. Exports account for about a fifth of the euro region's gross domestic product. Germany's central bank remains optimistic about prospects for a global recovery, which are ``favorable'' given fiscal and monetary policies around the world. The commission said the economy is being bolstered by interest rates at the lowest level seen across the euro region since at least 1946. The Bundesbank said financing conditions in Germany are ``preparing the ground well'' for a recovery. The euro region's economy expanded 0.4 percent in the third quarter after contracting 0.1 percent in the previous three-month period. The ECB forecasts that the economy will grow about 1.6 percent next year after expanding just 0.4 percent in 2003. Last Updated: December 15, 2003 11:28 EST