Friday, November 24, 2006

Euro's Rise Against the US Dollar

Euro's Rise Against the US Dollar (charted daily)

16 comments:

  1. 10 yers T-bonds are below a support of 4,54. It will end really nasty

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  2. I'm not sure what the significance is related to rise of the Euro. I would appreciate some insight into that.

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  3. Gold is rising- stocks are falling.

    Not good news for the bulls in RE and stocks.

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  4. It's another measure of how worthless the US dollar is. So, foreigners who hold US debt have to wonder why they are holding so much of it. At some point they will demand a higher risk premium. That's why it's a BFD.

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  5. Does this mean that our creditors (china and others) don't belive our inflation numbers?

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  6. So how about some insight into what this means for you and I?

    What is causing the dollar to fall? Europe growth and rising rates? Fear of recession here in US? Credit problems?

    What? What should investors with CASH expect? What should be done with the CASH? What markets are strong when dollar is weak? How can I best invest in this environment?

    Lets try to learn something here instead of pointing out the obvious.

    Your thoughts and opinions are greatly appreciated!

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  7. This is very interesting... it implies the balance of money entering/leaving the USA is now going towards leaving the country.

    In other words, we have to cut down our consumption of forign goods. This will first be felt in the credit markets... So it impacts RE in higher interest rates or stricter lending standards.

    Anon 7:39, you won't be saying BFD in a year. In effect, this forces a ~4% rate of inflation onto imported goods. This is going to keep the fed from dropping rates and might even cause them to raise rates (unlikely, but possible).

    In effect a falling dollar signals more long term domestic jobs (easier to export) but short inflation spikes.

    Neil

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  8. a weakening US dollar leads to foreign investors unloading R.E. investments, buying treasury notes, etc.
    US will likely need to increase interest rates in order to attract investment and fund US current account deficit.

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  9. the partys over...............

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  10. The lack of understanding of why foreign currency exchange rates affects US housing prices is a good example of why this housing bubble has continued and why many real estate "professionals" can't understand why housing prices are trending down.

    With the high trade deficit that the US runs continually, the US is very much a debtor nation. To buy goods from other countries, the US is constantly buying foreign currencies, driving up the value of these currencies relative to the US dollar.

    How does this affect housing? From my knowledge, there are two scenarios. We can let the value of our dollar fall to nothing. In this case, prices for imported goods will go through the roof driving up inflation. To combat this, the Fed will need to raise interest rates. The second scenario is that to attract demand for US dollar denominated debt (i.e., bonds), these bonds need to pay a higher interest rate due to the declining value of the dollar. This also has the effect of raising interest rates.

    Net result is that with the declining value of the dollar, interest rates have pressure to move up and we all know what higher interest rates does to the affordability of housing.

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  11. I'm not sure what the significance is related to the rise of the Euro, either. The Canadian $ isn't doing anything spectacular, so I wonder if this has more to do with the Euro and less to do with the common criticisms of the US dollar...

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  12. @ anonymous BFD

    it's a big deal because it means the value of U.S. denominated debt is going down. when debt prices go down, yields RISE--so it's a situation where the fed will raise rates or the market will do the fed's work for it by devaluing the currency. it is a VERY BFD.

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  13. The main reason is countries no longer need USD's to buy crude they can buy using euro's via iran or venezuela. Thia also explains the aggressive attitude of the US towards these two countries.

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  14. Inflation is scary. I look at these paper dollars and realize they are only worth what others think they are worth, which could drop at any time. As a massage therapist, I am always paid cash. I am a single mom with three kids and I what my extra money into precious metals: gold, silver, certified coins, etc... I think those markets will continue to go up as inflation does. It is better than a savings account in my opinion. I would suggest people find the best pricing through a national dealer. I always buy from Empire Gold Coins and been very happy with them. The bigger companies usually rip you off. Hope this helps, good luck!

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