he dollar fell versus the euro and pound after the Federal Reserve reduced its discount lending rate to prevent credit market losses from slowing the economy.
The dollar weakened against 15 of 16 major currencies as a reduction in borrowing costs dims the allure of U.S. assets. The decline today trimmed the dollar's weekly advance as investors had sought safety in the currency after a global rout of credit markets. U.S. and European stocks rallied.
``The Fed has taken the first step to calm down the market and restore investors' confidence,'' said Tom Fitzpatrick, global head of currency strategy at Citigroup Global Markets Inc. in New York. ``The dollar is getting a double-whammy. A reduction in interest rates makes it less attractive. The safe-haven flow into the dollar also flooded out.''
Here's a weekly chart of the dollar before today's action:
BTW: I have previously argued the dollar's value was a prime reason to not lower interest rates.
2 comments:
Bailout Ben decides to go the Reichsbank route. Time to accelerate the move into foreign currency holdings. This does not bode well for crude oil prices. What does Bailout Ben do when the police start finding frozen old people in their homes this winter when they can't afford their heating fuel oil?
What does Bailout Ben do when the police start finding frozen old people in their homes this winter when they can't afford their heating fuel oil?
Bonddad, I'm deeply, darkly cynical, and I think that Bernanke and the powers-that-be don't care about frozen old people. Or any of us, if we're not in the ultra-wealthy class. Everything they have done since 2001 is perfectly logically consistent if viewed through a prism of "how can we shove more of the total wealth of society into the accounts of really rich people?"
If some average people have a few good years by "cashing out equity in their homes" (i.e. going deeper into debt) that's fine with the Masters of the Universe (in the Tom Wolfe sense of the term.) We are ants at their picnic, and the Masters do not begrudge the ants a few crumbs. If lots of ants get squashed because their factory jobs move to China, or their home mortgage goes into default, or there are Medicare cutbacks because of a budget crisis and they die from lack of medical care, well, the Masters are not concerned with the fate of ants. And if the currency the ants buy petrol with is degraded, the Masters do not care, because they've hedged into euros and gold and Swiss villas. Tha Masters will be OK. The rest of us... like I say... ants.
Yeah, I'm cynical, cynical enough to move to another country where I hope it will not end so badly. That's why I listen to Air America Radio on the 'Net -- liked you on Sam Seder, mate! I'm not a total financial fool (that's why my wife and I sold our San Francisco house at the peak of the market and did with our money where the rich folks did) but I'm learning a lot from you.
Thanks for answering my questions in a back-handed sort of way, and for links like Investopedia, and for giving some perspective so I can understand what's happening with the entire forest, as I see the trees falling. Good onya!
(Apologies if this comes through multiple times. Blogger's word verification is screwy, and I'm not sure if it transmitted.)
Post a Comment