It has been a while since we looked at USD. Now that I am planning a trip to India (leaving on Friday 07/26) I decided to give this a fresh look and see where we are heading with USD….after all I have a lot of investment made in India (Rupeee denominated) and I hold some in US too (USD) ….so both side of the equation impacts me. I might have something to do with Euros as well and of course my all time favorite Gold and Silver…..
Good thing is I am diversified so if one side goes down the other goes up but none the less if tilt is same on either side, I remain balanced.[And remember this it not investment advise this is economic news so make your own decision but not based on what you read here. Generally those decision require a lot more study and research]
Anyway….back to our USD discussion…..and then we will look at other currencies, Gold and Silver too……..USD is important again because Fannie and Freddie are in trouble and as you know they are government sponsored enterprise and so is USD. We will see if there could be a link……….
I am not sure if you remember that post but Gulf States were forced to support USD not so long ago. Check my previous post on this [ http://www.diwakars.com/wordpress/?p=97 ] . Gulf states did not want to support but they were forced to do so.
US ‘urges UAE to retain peg’
Bloomberg
Published: March 19, 2008, 00:10
South Korea is another US friendly country. They also hold a lot of USD paper (bonds, notes what have you) and they have had it already…………
South Korean fund said to shun Treasuries
By Reuters | 27 Mar 2008 | 07:05 PM ET
South Korea’s National Pension Service, the world’s fifth-biggest pension fund, said on Thursday it was shying away from U.S. Treasurys because of falling yields and the weakening dollar.
The move by the NPS could signal a big shift by financial institutions away from U.S. government debt into higher-yielding assets, the Financial Times said.
The fund, which expects its assets to rise to 250 trillion won by the end of 2008, holds about 17.4 trillion won (US$17.63 billion) worth of foreign bonds of which U.S. Treasurys account for 94 percent. Those figures would suggest NPS holds about 16.4 trillion won in U.S. Treasurys.
So that is south Korea, what about Japan ? they have lot of USD denominated paper. They are US friendly state also……..
Dollar Slide Drives Budget as Japan Shuns Treasuries (Update2)
April 28 (Bloomberg)
“It’s too early to say the dollar will stop falling,” said Masataka Horii, head of the investment team in Tokyo for the $53.1 billion Kokusai Global Sovereign Open, Asia’s biggest bond fund. “The U.S. economy will be slow for a while.”
Japan owns more Treasuries than any other nation. After raising their holdings by $9.2 billion to $620.6 billion between March and July 2007, Japanese investors trimmed that stake by $34 billion through February, the Treasury said April 15.
Asian investors outside Japan are also pulling back. Money managers in China, the second-biggest overseas holder of Treasuries, with $486.9 billion, and South Korea say they favor debt in Europe, equities or commodities.
And a month or two later….our friendly Gulf guys are looking again to go away from mighty US dollar.
Gulf States May End Dollar Pegs, Kuwait Minister Says (Update4)
By Fiona MacDonald and Matthew Brown
May 1 (Bloomberg) — Gulf states are considering dropping their pegs to the dollar after the U.S. currency’s decline stoked inflation across the region, Kuwaiti Finance Minister Mustafa al- Shimali said.
Here is something from no other but Mr. Bernanke himself. May 6 (Bloomberg) — The dollar weakened against 11 of the 16 most-traded currencies after Federal Reserve Chairman Ben S. Bernanke said in a speech that mortgage delinquencies will weigh on U.S. economic growth.
“It’s going to be a bumpy ride for the dollar,” said Richard Grace, chief currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s second-largest lender. “Bernanke’s comments may cause the dollar to fall against the euro. The implication is the Fed is going to continue to provide liquidity.”
Read full article here
Now let us look at the latest news……….
US faces global funding crisis, warns Merrill Lynch
Merrill Lynch has warned that the United States could face a foreign “financing crisis” within months as the full consequences of the Fannie Mae and Freddie Mac mortgage debacle spread through the world.
The country depends on Asian, Russian and Middle Eastern investors to fund much of its $700bn (£350bn) current account deficit, leaving it far more vulnerable to a collapse of confidence than Japan in the early 1990s after the Nikkei bubble burst.
But the lion’s share is held by the central banks of China, Russia and petro-powers. These countries could all too easily precipitate a run on the dollar in the current climate and bring the United States to its knees, should they decide that it is in their strategic interest to do so.
David Bloom, currency chief at HSBC, said fears that regional banks could start toppling after the Fed takeover of IndyMac last week were now the biggest threat to the dollar.
“We have a pure dollar sell-off,” he said. “It’s a hating competition: at the moment the markets hate the dollar more than they hate the euro, even though German’s ZEW confidence indicator was absolutely atrocious.”
Now any questions about the trend where USD is heading ? I did not think so. I knew you’re smart…………well let us look at Rupee now and investments being made in India that may indicate some support for Rupee.
Click to read about Rupee….or other currencies.
I am not sure what will happen to $$ but in the middle of all this lonely Indian Rupee is waiting to gain…..(more money for me 
Bank of America Is Bullish on Indian Rupee Amid Inflation Fight
By Anoop Agrawal
May 5 (Bloomberg)
The currency will advance by about 9.6 percent to 37 per dollar by year-end and the Reserve Bank of India will increase the repurchase rate to 8 percent from 7.75 percent before its next meeting on July 29, according to Bank of America’s Yeo Han Sia. Royal Bank of Scotland and Calyon are the only other banks among 21 in a Bloomberg News survey predicting the currency will rise that far.
Where else the support is coming from ?…generally speaking when foreign investors buy stock in the country they support the local currency as foreign inflow is converted into domestic currency.
George Soros’ hedge fund Quantum on buying spree
14 Jul, 2008, 1101 hrs IST,Vijay Gurav, ET Bureau
Since hedge funds mostly operate as sub-accounts of foreign institutional investors (FIIs), their activity is also reflected in the flows of foreign portfolio investors on Indian bourses. These investors have pulled out funds aggregating Rs 30,000 crore, or $7 billion, of Indian equities while the Sensex crashed 7400 points, or 35%, from its peak of 20873 on January 8.
His hedge fund Quantum, which was reported to have posted earnings of over 30% last year, went on a buying-spree at a time, when most funds were dumping stocks in a sliding market.
So what happens if support for USD goes down ?
In other words EURO will go up more. But that brings problems for EURO zone. Their exports will hurt they are hurting already. Now mind you Euro zone is another friendly state. Isn’t it ? however they are very much upset with how USD is playing out in the market……..and that friendship is fast turning into not so good friendship. L@@K at the wording here…..
Authorities lose patience with collapsing dollar
By Ambrose Evans-Pritchard
Last Updated: 1:44am BST 19/04/2008
Jean-Claude Juncker, the EU’s ‘Mr Euro’, has given the clearest warning to date that the world authorities may take action to halt the collapse of the dollar and undercut commodity speculation by hedge funds.
“I don’t have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting,” he said.
My guess is USD and Euro are in a fight to loose value each currency wants to hold down position in order to boost their exports but as we all know one of them will have to be on the top…….may be we just have to wait and see which one…..
Gold and Silver
Need I say more my dear ? I guess headlines are enough………
Gold: the precious laggard that will hit $2,000
By Ian Williams, Charteris Treasury Portfolio Managers Last Updated: 2:00am BST 08/07/2008
Supply and demand fundamentals are favourable for gold bullion
By Evy Hambro Last Updated: 2:27pm BST 22/07/2008
Read Full Article here
Investors buy gold bars in record numbers
By Paul Farrow
Volatile stock markets and a lack of confidence in the UK banking system has boosted demand for gold bars and coins from private investors to levels not seen for 25 years.
And that’s enough for one day………not sure if you can handle more………until next time………….wish me luck…….I am flying with Air India……….tomorrow…….enjoy the fresh new look of the blog. Will keep adding stuff to it…if you haven’t read FDIC search it on the blog I will be posting more about it later (may be from India)
0 responses so far ↓
There are no comments yet...Kick things off by filling out the form below.
Leave a Comment