Dollar collapse unfounded but will continue south
December 19th 2006 02:03
Contrary to the so-called news, China to dump USD1 trillion, reported by Hal Turner, citing insider sources from the first rate US economic delegation to China, the "anticipated" Monday collapse of the US dollar was totally unfounded as the greenback slided on the back of a weaker than expected housing data and hazy economic outlook. In fact, China play wasn't in the scope and instead the Euro was the focus against the dollar.
Dollar to Decline Against Euro on Weaker Housing, BNP Predicts
By Ye Xie
Dec. 19 (Bloomberg) -- The dollar will drop against the euro through the end of this month as a slump in housing will slow the U.S. economy, according to BNP Paribas SA.
The U.S. currency dropped from a three-week high yesterday after a report showed confidence among U.S. homebuilders deteriorated in December, leading traders to increase bets the Federal Reserve will cut interest rates next year.
``The U.S. economy will slow faster than the market is anticipating,'' said Ian Stannard, a currency strategist in London at BNP. ``The housing data are still going to be on the weakening trend. That will keep the dollar under pressure toward year-end.''
The dollar was at $1.3097 per euro at 5:17 p.m. in New York yesterday, after reaching $1.3053, the strongest since Nov. 24. It reached a 20-month low of $1.3367 per euro on Dec. 4 as traders bet the Fed's next move would be to cut rates before April.
The central bank left its benchmark rate unchanged at 5.25 percent this month for the fourth straight meeting, after 17 increases starting in June 2004.
The dollar will decline to $1.3280 per euro by year-end, and investors should buy euros if the 12-nation currency falls to $1.3020, Stannard said.
The euro will rise to $1.35 in the next three months and then to $1.40 in the second quarter, Paris-based BNP predicted in a research note yesterday. The euro's record high is $1.3666, set in December 2004.
Weaker Housing
Statistics today will show U.S. housing starts slowed last month, disappointing investors expecting a rebound from a six- year low, according to BNP's prediction.
Housing starts in the U.S. probably increased to an annual rate of 1.54 million in November from a 1.486 million pace in October, according to the median estimate in a Bloomberg survey. BNP expects starts to decline to a 1.4 million rate, according to Stannard. The Commerce Department will release the data at 8:30 a.m. New York time today.
Many traders expect ``the housing starts to stabilize, but we believe that is unlikely to be the case,'' said Stannard. ``We are very bearish on the U.S. economy.''
Goldman Sachs Group Inc. yesterday pared back its forecast for reductions in the Fed's benchmark lending rate next year amid signs of stabilization in the housing market. The Fed will cut its benchmark to 4.5 percent in 2007 from 5.25 percent now, Goldman said. The prior forecast was for a reduction to 4 percent next year.
German Confidence
The euro will also gain as a survey to be released today will probably show German business confidence exceeded November's 15-year high, according to BNP's forecast.
BNP forecasts the Ifo institute's sentiment index, based on responses from 7,000 executives, climbed to 108.5 in December from 106.8 in November. The median forecast in a Bloomberg survey was for the index to be unchanged at 106.8.
The European Central Bank has raised its benchmark interest rate six times in the past year to 3.5 percent.
ECB council member Klaus Liebscher said last week it is wrong to conclude the bank is done raising rates as stronger growth is threatening to boost inflation in the region.
``We have no pre-committed opinion regarding further interest-rate moves,'' Liebscher said at a briefing in Vienna. ``But from this you can't draw the conclusion `that was it.'''
Source: http://bloomberg.com/apps/news?pid=20601083&sid=aLaT9pUT_ICY&refer=currency
Dollar to Decline Against Euro on Weaker Housing, BNP Predicts
By Ye Xie
Dec. 19 (Bloomberg) -- The dollar will drop against the euro through the end of this month as a slump in housing will slow the U.S. economy, according to BNP Paribas SA.
The U.S. currency dropped from a three-week high yesterday after a report showed confidence among U.S. homebuilders deteriorated in December, leading traders to increase bets the Federal Reserve will cut interest rates next year.
``The U.S. economy will slow faster than the market is anticipating,'' said Ian Stannard, a currency strategist in London at BNP. ``The housing data are still going to be on the weakening trend. That will keep the dollar under pressure toward year-end.''
The dollar was at $1.3097 per euro at 5:17 p.m. in New York yesterday, after reaching $1.3053, the strongest since Nov. 24. It reached a 20-month low of $1.3367 per euro on Dec. 4 as traders bet the Fed's next move would be to cut rates before April.
The central bank left its benchmark rate unchanged at 5.25 percent this month for the fourth straight meeting, after 17 increases starting in June 2004.
The euro will rise to $1.35 in the next three months and then to $1.40 in the second quarter, Paris-based BNP predicted in a research note yesterday. The euro's record high is $1.3666, set in December 2004.
Weaker Housing
Statistics today will show U.S. housing starts slowed last month, disappointing investors expecting a rebound from a six- year low, according to BNP's prediction.
Housing starts in the U.S. probably increased to an annual rate of 1.54 million in November from a 1.486 million pace in October, according to the median estimate in a Bloomberg survey. BNP expects starts to decline to a 1.4 million rate, according to Stannard. The Commerce Department will release the data at 8:30 a.m. New York time today.
Many traders expect ``the housing starts to stabilize, but we believe that is unlikely to be the case,'' said Stannard. ``We are very bearish on the U.S. economy.''
Goldman Sachs Group Inc. yesterday pared back its forecast for reductions in the Fed's benchmark lending rate next year amid signs of stabilization in the housing market. The Fed will cut its benchmark to 4.5 percent in 2007 from 5.25 percent now, Goldman said. The prior forecast was for a reduction to 4 percent next year.
German Confidence
The euro will also gain as a survey to be released today will probably show German business confidence exceeded November's 15-year high, according to BNP's forecast.
BNP forecasts the Ifo institute's sentiment index, based on responses from 7,000 executives, climbed to 108.5 in December from 106.8 in November. The median forecast in a Bloomberg survey was for the index to be unchanged at 106.8.
The European Central Bank has raised its benchmark interest rate six times in the past year to 3.5 percent.
ECB council member Klaus Liebscher said last week it is wrong to conclude the bank is done raising rates as stronger growth is threatening to boost inflation in the region.
``We have no pre-committed opinion regarding further interest-rate moves,'' Liebscher said at a briefing in Vienna. ``But from this you can't draw the conclusion `that was it.'''
Source: http://bloomberg.com/apps/news?pid=20601083&sid=aLaT9pUT_ICY&refer=currency
| 78 |
| Vote |
subscribe to this blog
Comment by Cibbuano
Hunt Famous
Orble Post of the Day
Fat Cult
Techbreak
Comment by Benkaiser