Although it is way too early to be certain, the foreign exchange markets appear to be responding positively to the plans to shore up the banking system announced by EU leaders earlier today. Since many European banks funded some of their balance sheets in dollars, a fall in the dollar would also offer some direct stress relief/
From Bloomberg:
The euro rose the most in three weeks against the dollar and the yen after European leaders agreed to guarantee bank borrowing and prevent big lenders from going under.
The currency advanced as leaders of the 15 countries using the euro announced measures including a pledge to guarantee new bank debt until the end of 2009; permission for governments to shore up banks by buying preferred shares; and a commitment to recapitalize any “systemically” critical banks in distress.
“We are looking at the ladder to recovery,” said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland. “The market believes that come Monday open European time there will be something on the table that is supportive for the euro.”
The euro rose 1.1 percent, the most since Sept. 22, to $1.3554 at 8:19 a.m. in Sydney, from $1.3408 late in New York on Oct. 10. It advanced 1.4 percent, the most since Sept. 19, to 136.85 yen, from 134.96 on Oct. 10.
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Can Hank save the Dollar with another bet against the Euro?
Guns & Ammunition
Does Hank have anything left to put into his bazooka?
Is the $USA losing its reserve status?
Traders with The Euro are willing to speculate on bailouts and shadow intervention and continue to play along until something better comes along — or until this falls apart again. Speculation and confidence seldom coexist, so wait a few months and see how many gurus are left in this game. Essentially, the casino is temporarily open and this instant-lotto trend is a promotional marketing gimmick to lure lemmings back to the table — but who cares at this stage?
The dollar’s reserve status would benefit considerably if a nation or two leave the European monetary union.
"Essentially, the casino is temporarily open and this instant-lotto trend is a promotional marketing gimmick to lure lemmings back to the table"
Well said.
The Sovereign States have just entered the casino.
Except they are not Sovereign when it needs to go "Cap in Hand" to a moneylender.
The USA & Europe may think that they are committing future tax receipts to the various bailouts but that rather depends on the mood of the pawnboker.
And maybe the pawnbroker fancies your daughter.
Anonymous said…
The dollar’s reserve status would benefit considerably if a nation or two leave the European monetary union.
October 12, 2008 7:57 PM
It unlikely any country is willing to leave EUR. Looks what’s happened to Iceland, they wish they had EUR as the currency right now.
The question is will Sweden join the EUR as the result of the crisis?
vote of confidence? great! I have heard those words before. let the show continue, just let me have my seat please. “Fundamentals Of Our Economy Are Still Strong”, in the US, in the EU, everywhere. We have have to go through a little deleveraging, realignment, some social changes and we will be rolling again, if we survive the process.