Note the Dollar chart at my portion of the MDA site. It has been stuck in this wedge for a while and it can't do so much longer, should get pushed out Monday or Tuesday one way or the other. My system says it should break down from a TA perspective but this article implies that the Kosovo ordeal and Japanese recovery may hold it up. Is Rubin going to fire up the printing presses again for the good of the rest of the world and spark another market rally or will they let the rest of the world suffer so we can have a responsible fiscal policy? Anyone notice the M3 money supply charts recently. Looks like they were trying to pull some of the firewood off this market. Can they keep it up? There was also a good article warning about China on the Gold thread but there was no link to verify it's accuracy so I did not copy it here. It basically stated that their banking system is on dangerous ground. Anyway, here is the US Dollar article...
Dollar Poised to Gain Against Euro With No End Seen to War in Yugoslavia
Dollar Could Rise vs Euro as Kosovo Fighting Rages (Repeat)
(Repeats story from April 23.)
New York, April 25 (Bloomberg) -- The dollar could extend
its 2.5-percent gain against the euro since NATO began bombing
Yugoslavia as the strike goes into its fifth week with little
sign of nearing an end.
''We're in for a long grind in Yugoslavia,'' said Jay
Bryson, an international economist at First Union Corp. and a
seller of euros. The military costs to Europe's already slowing
economies could ''take the euro to $1.0560 and then to $1.03 in
the next month or two,'' he said, from $1.0608 per euro now.
The dollar strengthened from $1.0646 late Thursday in New
York and fell to 119.14 yen from 119.53. For the week, the euro
fell 0.90 percent against the dollar and the yen fell 1.25
percent as Japanese officials warned a strong yen could squelch
any economic recovery.
Analysts said the war in Yugoslavia could soon turn to
ground fighting. At a North Atlantic Treaty Organization summit
in Washington, officials are updating contingency plans for the
possible use of ground troops and some analysts said approval
could come this weekend.
Another meeting of top officials -- finance ministers of
the Group of Seven leading industrial nations -- could also sway
the currency market. Speculation has been building among
currency traders last week that the leaders, who convene Monday,
may act to bolster the euro and weaken the yen, up 3.6 percent
against the dollar since early March.
Hopes Dashed
U.S. and U.K. officials rejected a proposal by Yugoslav
President Slobodan Milosevic to allow unarmed international
observers in the Kosovo province, where Yugoslavia has expelled
much of the ethnic Albanian majority, in return for an end to
NATO air strikes and withdrawal of troops from the region.
A Russian mediator relayed an offer from Milosevic to allow
United Nations personnel into Kosovo, sparking a brief rebound
in the euro to $1.0684. The rally sputtered as the U.S. and U.K.
said it didn't meet NATO's demands.
''Call us cynics, but last night's reported Kosovo deal,
brokered by the Russians, was just a cheap power play,'' said
Stewart Newnham, a currency strategist at Commerzbank in London.
''We think that the prospect of a peace deal is remote.''
The fighting in Kosovo increases the ''risk premium''
associated with holding euros, Newnham said. That's led
Commerzbank to slash its forecast for the euro in the coming
months to 98 U.S. cents from $1.07.
Analysts said NATO ground troops may be the only way to
convince Yugoslavia to accept all of NATO's demands, though
they're split on the effect that would have on the euro.
The U.S. said it will send a mechanized infantry company to
the region, with 15 M-1 Abrams tanks, 14 Bradley fighting
vehicles, eight Howitzers and Mulitple Launch Rocket Sytem
artillery battery, Agence France Presse reported.
Ground Debate
''Any widening of the conflict will be negative for the
euro,'' First Union's Bryson said. ''I would be a seller of
euros in that case.''
A ground operation could, though, help the euro by speeding
the peace process, said Paul Podolsky, a currency strategist at
BankBoston. ''Using ground troops increases the chance Milosevic
will agree to peace, which would be a reason to buy the euro,''
he said. ''Longer-term, though, the euro is a sell'' because of
stagnant European growth. He's recommending clients sell euros
on any rebound.
Financing the military strikes against Yugoslavia and
housing refugees fleeing Kosovo could inflate budget deficits in
the 11-nation euro zone and worsen an economic outlook already
clouded by evidence of slower growth.
Hans Eichel, the finance minister of Germany, the largest
euro country and the largest economy in the region, said
Thursday gross domestic product probably won't grow at the 2
percent pace the government has forecast for 1999. That's down
from 2.8 percent in 1998.
And a report Thursday showed industrial production in
France, the second-largest euro member, unexpectedly declined
0.6 percent in February.
Further weakness in Europe's single currency could call
European monetary leaders into action. The Wall Street Journal
reported Thursday that French Finance Minister Dominique Strauss-
Kahn said further euro weakness would be undesirable, as it
could make euro-region assets unattractive to investors.
Guy Quaden, Belgium central bank governor and a member of
the ECB, said the euro is likely to rebound against the dollar
as the pace of European economic growth accelerates.
''It's probable that the difference between the economic
growth rates of the U.S. and Europe will diminish,'' he said.
Quaden said the euro's drop is ''limited and explainable,
but it's not desirable that it should worsen.'' He added that
the ECB has no precise objective regarding exchange rates.
''An excessive drop of the euro could have negative
consequences on inflation in the euro zone because of its impact
on the price of imports and on the confidence of people who are
saving in euros.''
Nobody from the Belgian central bank was available to
confirm on Quaden's comments.
Dollar-Yen
In other trading, analysts said the yen will remain caught
between growing optimism for an end to Japan's year-long
recession and Japan's desire not to have a strengthening yen
derail recovery.
Japanese Prime Minister Keizo Obuchi said he will announce
plans for economic pump-priming measures, which could be funded
by a new budget, when he meets U.S. President Bill Clinton in
Washington on May 3. The prospect of more spending, along with
gains in the stock market, are fueling hope the worst of Japan's
malaise may be ending.
''The turning point in the Japanese economy is near,'' said
Ulrich Beckmann, a strategist at Deutsche Bank in Frankfurt.
''It's clear that sentiment is changing (for Japan).''
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Good Luck,
Lee |
