With America’s high current account deficit not showing much improvement. the dollar’s recent rally seemed to be based on the greenback being oversold rather than improved fundamentals. Historically, countries that run current account deficits in excess of 4% of GDP suffer depreciation of the value of their currency, and the US is still well above […]
Read more...A reader sent this note by AIG’s Bernard Connolly, which is surprisingly blunt for a sell-side analyst: In saying today that the housing price correction must be allowed to proceed, Paulson is in effect calling for a massively weaker dollar – athough he probably does not realise it. Of course it is true, as Paulson […]
Read more...Brad Setser, a source for thorough, thoughtful coverage on currencies and related topics, provides his monthly parsing of the Treasury International Capital report (this one from January, plus its survey of foreign holdings of US securities as of the end of June 2007) and does not like what he sees. Since the August TIC report, […]
Read more...The comments in the Financial Times by Yoshimi Watanabe, Japan’s financial services minister, are extraordinary. He ventured to give the US advice on its credit crunch based on Japan’s experience during its post-bubble-years banking crisis. And it’s not pretty. Why are these remarks so unusual? Consider: Most countries don’t give other countries advice on how […]
Read more...As told in Bloomberg, currency traders anticipate the dollar will continue its slide until our trading partners decide they’ve had enough. Of course, the very expectation of intervention may limit the dollar’s fall, at least for a while. My sources in Japan tell me that the officialdom still sees the yen as cheap, and the […]
Read more...When we’ve said the greenback could lose its reserve currency status to the euro, the idea has often been met with derision. Yet we see evidence that international commercial transactions are moving away from dollar-based invoicing, a sign that the tectonic plates are shifting. In a post at VoxEU, Jeff Frankel, a Serious Economist (and […]
Read more...The title of this article (provided by the page editors of the Telegraph) is a tad more sensationalistic than it need to be, but the basic observation holds: the Fed has gone so far in debasing the dollar that it is starting to see serious pushback from foreign investors. This is a serious matter. The […]
Read more...I rarely feature Wall Street Journal articles in long form because I figure most readers will find them on their own. But the Journal’s Saturday edition isn’t as widely read, and this is an exceptionally good piece, particularly given that the Journal is not the best source on credit market reporting. The ongoing crisis seems […]
Read more...Krugman, in his New York Times op-ed today, “Betting the Bank,” reminds us that the Fed is much like the Wizard of Oz: the perception of its power vastly exceeds reality. In normal times, the limited tools central bankers have at their disposal can be used to great effect, but extreme conditions reveal their impotence. […]
Read more...Asian markets opened lower, then took a nosedive after the release of a report that troubled mortgage bond hedge fund to Carlyle Capital failed to reach a standstill with creditors (hat tip reader cb). The Nikkei fell 3.5% to 12,400. The dollar dropped to 100 to the yen. I bought yen at around 111 in […]
Read more...The yen has had a major spike up in the last few days, going from 107 to just over 103 in Tokyo trading today. Note that moves of the yen are both the result of and the cause of market turmoil. When markets get nervous, traders cut back on yen-funded positions. They must buy yen […]
Read more...A number of commentators (see here and here) have taken note Warren Buffett’s favorable remarks in his much-anticipated annual letter to Berkshire Hathaway shareholders on sovereign wealth fund investment in the US. What I found far more significant was his somewhat-longer-form observations about how we had gotten ourselves in the situation where SWF-type capital inflows […]
Read more...The repeated rounds of Fed rate cuts have led the dollar to fall against most currencies save those maintaining currency pegs. While the yuan has appreciated somewhat, it hasn’t been sufficient to have much impact on Chinese trade surplus with the US (2007 was a record year). And because China and its peers are having […]
Read more...Brad Setser, in one of his thorough and informative posts, parses the December Treasury International Capital report and finds strengthening of a trend he noted in the August TIC report: that the dollar purchases that fund our current account deficit come almost entirely from central banks and other government purses, and not private sector buyers: […]
Read more...Brad Setser comes as close to sounding cheerful as I’ve recalled him being in quite some time in today’s post, “The worse the dollar does, the more dollars central banks want …“ I hate to take issue with the good doctor, particularly in his area of expertise, but this may be the lull before a […]
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