.... have you got gold yet? ....

  1. dub
    33,892 Posts.
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    The "Slow Train Coming" appears to be speeding up a bit.


    Dollar Tumbles as International Investors Buy Fewer U.S. Assets

    Nov. 18 (Bloomberg) -- The dollar had its biggest decline against the euro in about a month in New York trading after a government report showed net foreign purchases of U.S. securities in September fell to the lowest in five years.

    A drop in the amount of stocks and bonds bought by international investors makes it harder for the U.S. to finance the deficit in its current account, the broadest measure of trade and investment. The Treasury Department said foreigners bought a net $4.19 billion in September, down from $49.9 billion in August and the smallest since $1.17 billion in September 1998.

    ``It's the hardest evidence yet the U.S. current account deficit has finally become unsustainable and the foreign appetite for U.S. securities has finally fallen short,'' said Michael Woolfolk, a currency strategist at the Bank of New York, the third-largest New York-based bank. There is ``a dependence on increasing inflows just to keep the dollar steady.''

    As of 11:36 a.m. in New York, the dollar had weakened to $1.1871 per euro from $1.1749 yesterday. It fell as low as $1.1911, the weakest since June. The dollar's record low is $1.1933 per euro, reached on May 27. It fell to 108.21 yen per dollar compared with 108.92.

    The dollar's decline triggered previously set orders to sell the currency at specific levels, such as $1.1810 per euro and $1.1845, according to Chris Melendez, president of Tempest Asset Management, a hedge fund in Irvine, California. The next level is $1.1933, he said.

    ``We've hit `stops' after `stops,' and the move has accelerated from there,'' Melendez said.

    China Policy

    Declines also accelerated after the Bush administration said it intends to limit imports of some textiles and apparel from China to stem a record flow of goods from that nation and protect mills in states such as North Carolina. U.S. textile and apparel companies such as Milliken & Co. had said rising imports from China threaten to put U.S. and Caribbean manufacturers.

    ``Every time the U.S. imposes more trade sanctions, it's a sign the dollar is going to weaken,'' said Kenneth Landon, senior currency strategist, at Deutsche Bank AG in New York. ``At the same time, it's a sign of lower inflows to the country.''

    Some U.S. companies and lawmakers blame China's currency policy -- which pegs the yuan at about 8.3 to the dollar -- for the increasing U.S. trade deficit and some of the 2.5 million job losses in the manufacturing sector during President George W. Bush's tenure.

    Interest Rates

    The dollar remained lower versus the euro and yen after a Labor Department report showed the consumer price index held steady in October after rising 0.3 percent in September. Excluding food and energy costs, the so-called core index rose 0.2 percent after a 0.1 percent increase in the prior month.

    Last week, the dollar had its biggest weekly loss in six months after St. Louis Federal Reserve President William Poole signaled inflation isn't accelerating at a pace that would cause the central bank to raise its target interest rate, now at a 45- year low of 1 percent.

    Some investors are buying debt of nations with higher interest rates. The benchmark Australian 10-year note, yields 1.66 percentage points more than Treasuries with comparable maturity, up from 1.30 percentage points on Oct. 1. Australia's dollar is up 5.8 percent versus the dollar this quarter, second only to the 6.36 percent gain for the New Zealand dollar among the 17 most widely traded currencies.

    ``There's no doubt the U.S. economy is rebounding, but the underlying factor impacting the dollar is the record current account deficit and insufficient inflows to finance it,'' said Margaret Browne, a currency analyst at HSBC Bank USA Inc. ``The difference in interest rates is still playing an important part and favoring the euro.''

    Deficit, Iraq

    In the second quarter, the deficit in the current account held at a record $138.7 billion. The U.S. has had to borrow more money overseas to satisfy demand for imported goods and services to finance investment not covered by U.S. savings.

    The dollar fell earlier on speculation fighting in Iraq may intensify, spurring terrorist attacks against the U.S. and its coalition allies. Two U.S. soldiers were killed yesterday in Iraq, a day after a report that al-Qaeda may strike Britain, Italy and Japan. The dollar is down 4.8 percent against the euro since Bush's May 1 announcement that major military operations in Iraq were over.

    ``The broader issue is how the U.S. is doing in Iraq,'' said Mary Davis, a currency strategist in London at Credit Suisse First Boston. ``If there is further deterioration, the situation will impact on the dollar.''

    An audiotape broadcast yesterday on Dubai's Al-Arabiya television containing a message purportedly from Saddam Hussein said U.S.-led forces in Iraq had reached a ``dead end,'' and called for a holy war against the occupation. The U.S. Central Intelligence Agency said it is unable to confirm whether the tape was of the ousted Iraqi leader.

    `Real Muscle'

    In other trading, the dollar fell against the Swiss franc and the Australian dollar. The U.S. Dollar Index, a measure against a basket of six currencies, fell to 90.73 from 91.61. It's now at the lowest since January 1997. The index has lost more than 10 percent this year. Gold rose.

    ``Risk aversion is by no means dead, and the support for gold prices reflects that,'' said Naomi Fink, a currency strategist in Tokyo at BNP Paribas SA.

    The dollar fell even after U.S. Treasury Secretary John Snow said the U.S. economic expansion has ``real muscle'' and will continue to create jobs in the months ahead. He spoke at a Confederation of British Industry gathering in Birmingham, central-England.

    Still, the economy may slow in the fourth quarter after surging at the fast pace in 19 years in the prior quarter, according to economists surveyed by Bloomberg News. The economy may grow 4 percent this quarter, compared with 7.2 percent in the third quarter.


    A report from the Federal Reserve yesterday showed manufacturing in New York state expanded at a faster pace in November. An index compiled by the Federal Reserve Bank of New York rose to 41 this month, the highest since the survey began in July 2001.

    Still, there are disagreements as to where the dollar is headed. Steven Saywell, a currency strategist at Citigroup Inc. in London says the dollar will strengthen to $1.11 per euro in the `near-term.' Monica Fan, his opposite number at RBC Capital Markets, says it will end the year at $1.17.

    ``We still think the market is underestimating the potential for the U.S. economy to rebound in the fourth quarter and next year,'' said Saywell in a televised debate between the two strategists on Bloomberg News. ``The growth differential relative to Europe will grow.''

    Last Updated: November 18, 2003 11:49 EST


    Be careful, eh.


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