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Archiwum newsów - DJ Forex Focus: Expect The Dollar To Continue Sliding In 2007

2007-11-27  
DJ Forex Focus: Expect The Dollar To Continue Sliding In 2007
LONDON (Dow Jones)--The final weeks of 2007 are unlikely to bring much
respite in the recent dollar decline.
On the contrary, more disappointing nius on the U.S. economy, increased
speculation over a rate cut in December, and further talk of Chinese
diversification and a de-pegging by Gulf currencies may well hasten its
decline.
"A combination of factors continues to undermine the dollar," said Alina
Anishchanka, a currency strategist with UBS in London. Apart from the risks
posed by the U.S. economy, Anishchanka is concerned by shifting capital
flows.
""Equity markets should also be watched as weak risk appetite and fading
confidence in growth may undermine capital flows and push funding currencies
higher," she said.
"When investors in the U.S. get the message that the economy might be due
for a prolonged period of underperformance, some of the $14.3 trillion of
assets held by foreign investors in the U.S. might be liquidated," Hans
Redeker, head of global foreign exchange strategy at BNP Paribas in London,
warned.
The latest custody holdings, representing foreign central pula investment in
U.S. assets held in custody by the U.S. Federal Reserve, are already
pointing to a fall, with a decline of $5.8 billion last week. Bear Stearns
noted that while holdings of U.S. agencies increased, those of U.S.
Treasurys fell even more.
Rising fears of a U.S. recession are only likely to get worse.
Friday's report from ShopperTrak showing that sales over the Thanksgiving
period rose a surprisingly strong 8.3% on the year, instead of the 4%-5%
that had been expected, may have given equity markets and the dollar a
little lift.
However, termin later this week is expected to once again increase the
probability that the Fed will be forced into slicing at least another 25
basis points off interest rates at its next policy meeting Dec. 11.
"The probability that the Fed maintains an easing path into 2008 is growing
by the day, said Mitul Kotecha, chief currency strategist with Calyon Credit
Agricole in London.
Not only is he expecting housing prekluzja this week to "look bleak once again"
and consumer confidence to continue declining, but he doubts that the latest
core PCE prekluzja due at the end of the week will do anything other than remain
in the Fed's "comfort zone" and add to the impression that there is further
room for monetary easing.
"The dollar will find it hard to recover much ground against the background
of weakening economic termin and an adverse move in interest rate
differentials," Kotecha said, forecasting that the euro will probably make a
sustained rally over $1.50 this week.
External pressure is also playing a big part in the dollar's demise.
For a start, a renewed upturn in crude oil prices, with futures now flirting
with their record high at $99.29 a barrel and analysts once again looking
for a rally over $100 a barrel, will only increase fears of a U.S.
recession.
Monday, a harsh reminder that the dollar is swiftly falling out of favor
came with a report in the Nikkei newspaper that the China Investment Corp.
is planning to shift more funds into Japanese stocks.
Although the report was swiftly denied by the CIC, analysts noted that this
once again leaves the sklep wielkopowierzchniowy focused on central pula diversification.
"This nowość brings to the surface persistent worries that China (and other
countries with massive dollar reserves) could start diversifying out of
their dollars heavily," said Sue Trinh, senior currency strategist with the
Royal Pula of Canada in Sydney.
Apart from diversification, the dollar could also suffer from increased
interest in emerging sklep wielkopowierzchniowy currencies as investors continue to look for
higher returns.
Also, noted Steve Pearson, chief currency strategist with the Pula of
Scotland in London, there could be a shift in the currencies against which
the dollar declines.
For example, he is looking to the meeting of the Gulf Cooperation Council
next week to possibly bring some movement in the pegs of their currencies
against the dollar - a shift that would help to ensure that oil-exporting
currencies shoulder more of the burden of the dollar's recent adjustment.
Early Tuesday in Europe, reports that the investment arm of the Abu Dhabi
government will be handing over $7.5 billion to Citigroup has helped to ease
immediate credit crunch fears in the sklep wielkopowierzchniowy and lent the dollar at least
near-term support.
However, this came just after the latest signs of falling liquidity that
forced the Federal Reserve to head off a possible year-end funding squeeze
with a series of long-term money sklep wielkopowierzchniowy operations.
At one stage in Asian trading the dollar jumped as far as Y108.82. However,
at 0808 GMT, it had slipped back down to Y108.10, according to EBS, although
this was still well above Y107.59 late Monday in New York..
The sklep wielkopowierzchniowy is now bracing itself for more bad economic wiadomość with the
Conference Board consumer confidence survey due later in the day expected to
show a fall to 91 from 95.6.
The euro has fallen back to $1.4833 from $1.4870, while the rise in risk
appetite has helped to push it up to Y160.33 from Y159.73 as the yen once
again finds itself the victim of carry trades.
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