Potentially Large Rate Cut Weighs On US Dollar
By Grace Cheng
Last week was rewarding for those who shorted the US dollar in the forex markets: the US dollar continued to fall lower against majors currencies such as Euro, Swiss franc, Yen and British pound. News of the Bear Stearns bailout and its near-collapse gave financial markets signs that things are going badly in many major financial institutions, and there are definitely more worms in the can than we know now. The US Federal Reserve will meet to determine interest rates on March 18, this Tuesday. Futures traders put the chances of a full 1 percentage point cut at 50%. That is a massive 100 basis points cut, which would be the largest rate cut in the two decades since the federal funds rate has been used to steer the US economy.
Last week’s US inflation data showed that there was no inflation in the US last month, something which many market players find bizarre or ridiculous. How could there be no inflation even when oil prices are climbing? If the Fed thinks it can now cut so aggressively without caring about future inflation, there’s bound to be more troubles in the future.
Oh, and talk about saving big-buck financial firms from the dire consequences of their own bad decisions and greed. When has it become the Fed’s job to be creditors and to reward bad decisions? Jim Rogers, the billionaire investor, said last week on CNBC that he wants to abolish the Fed, and said they are promoting socialism for the rich. It sure seems like the current system is protecting rich institutions from their own mistakes, although many shareholders and employees are suffering.
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The greenback hit an almost 13-year low against the yen at 98.90, its lowest mark since September 1995. It also fell to an all-time low against the Swiss franc, dropping below parity again to 0.9980. Last week, European Union leaders took the unprecedented step of putting their concern about recent movements in foreign exchange markets on the record in a statement following a two-day summit in Brussels. If US data comes in weak, we could see more downside risks for the USD.
Watch the video below:
Monday:
Japan leading economic index 0500 GMT
Swiss retail sales 0815 GMT
Eurozone employment 1000 GMT
US current account, Empire manufacturing 1230 GMT
US TICS 1300 GMT
US industrial production 1315 GMT
Posted in Categories: Economy, Forex, Videos.
(1 votes, average: 5 out of 5)
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= Commodities, 
My guess is a 50bp cut
I’ll keep shorting the dollar! It’s now becoming the new carry financing pair like it was before the fed started raising rates a few years ago!
Way to go Grace! My thoughts exactly. Thank you.
The idea that we are supposed to believe that Inflation is at less then 4% is absolutely ridiculous. The truth is more like 10 to 15% if not even more. I do not see any justification for the Fed to reduce interest rates and for the government to bail out a business who placed themselves in that position in the first place.
I was also reading some currency forecasters seeing the USD to appreciate this year. Where are they getting this information as all points to a large devaluation of the USD for as long as anyone can see.
I think it is very likely within the next few months to see $1.00USD = 0.20 Euro, $0.35CAD, 40Yen, $0.50AUD and even that I think is a conservative forecast.
$1.00USD = 0.20 Euro, $0.35CAD, 40Yen, $0.50AUD and even that I think is a conservative forecast.
If USD goes to above level in the NEXT FEW MONTH, the global financial market will icollapse. Most countries, including Singapore, a large portion of reserve is held in USD treasury bills and usd financial denominated assets.
Hi!
Can´t view the videos with the new Internet Explorer 8 beta…!?
/Gero
You need to download Adobe Flash for the videos to work
Hi Grace!
I got Adobe Flash installed but there seems to be a conflict with it and the new IE8!
I could watch your videos fine with IE7.
Rgds,
/Gero