Dollar Falls As the World Contemplates Four More Years of Bushonomics

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Sun, 07 Nov 2004 16:46:03 -0800

Subject:Dollar Falls As the World Contemplates Four More Years of

Bushonomics

 

 

Dollar Falls As the World Contemplates Four More Years of Bushonomics

 

[note: the numbers here represent direct international currency

exhcange rates, of course. However, on the tourist level, what you get

for your dollar at the local bank, the pound has already broken $2 US,

and the Loonie is running right around ninty cents. The Euro is at

$1.43.]

 

Steve Johnson in London and Andrew Balls, The Financial Times, November

7, 2004

 

http://news.ft.com/cms/s/257979a6-30f4-11d9-a595-00000e2511c8.html

 

Washington -- The dollar could slide still further, in spite of hitting

an all-time low against the euro last week in the wake of George W.

Bush's re-election, currency traders have said.

 

The dollar sell-off has resumed amid fears among traders that Mr Bush's

victory will bring four more years of widening US budget and current

account deficits, heightened geopolitical risks and a policy of " benign

neglect " of the dollar.

 

Many currency traders were taken aback on Friday when the greenback fell

in spite of bullish data showing the US economy created 337,000 jobs in

October.

 

" If this can't cause the dollar to strengthen you have to tell me what

will. This is a big green light to sell the dollar, " said David Bloom,

currency analyst at HSBC, as the greenback fell to a nine-year low in

trade-weighted terms.

 

The dollar's fall comes as the Federal Reserve is widely expected to

raise US interest rates by a quarter point to 2 per cent when it meets

on Wednesday and to signal that it will continue with a measured pace of

rate increases.

 

Speculative traders in Chicago last week racked up the highest number of

long-euro, short-dollar contracts on record. Options traders have

reported brisk business in euro calls - contracts to buy the euro at a

pre-determined rate.

 

However, the market has been rife with rumours that the latest wave of

selling has been led by foreign governments seeking to cut their

exposure to US assets.

 

India and Russia have reportedly been selling US assets, as well as

petrodollar-rich Middle Eastern investors.

 

China, which has 515 billon dollars of reserves, was also said to be

selling dollars and buying Asian currencies in readiness to switch the

renminbi's dollar peg to a basket arrangement, something Chinese

officials have increasingly hinted at. Any re-allocation could push the

dollar sharply lower and Treasury yields markedly higher.

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