Dollar Staggers as U.S. Unleashes Cash Flood, Deficit

Bo Nielsen and Daniel Kruger
Bloomberg
Monday, Dec 15, 2008

The biggest foreign-exchange strategists and investors say the best may be over for the dollar after a four-month, 24 percent rally.

The currency weakened 5.9 percent measured by the trade- weighted Dollar Index after strengthening between July and November as investors bought the greenback to flee riskier assets and repay dollar-denominated loans from lenders reining in credit. Ever since peaking on Nov. 21, the dollar fell against all 16 of the most-widely traded currencies, according to data compiled by Bloomberg.

U.S. policy makers are flooding the world with an extra $8.5 trillion through 23 different plans designed to bail out the financial system and pump up the economy. The decline shows that the increased supply of money may be overwhelming investors just as the government steps up debt sales, the trade and budget deficits grow and de-leveraging by investors slows.

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“The dollar will go to new lows as the U.S. attacks its currency,” said John Taylor, chairman of New York-based FX Concepts Inc., which manages about $14.5 billion of currencies.

Citigroup Inc., Goldman Sachs Group Inc., BNP Paribas SA and Bank of America Corp. predict further weakness. Last week was the first time in almost a month that consensus estimates for the dollar against the euro through 2009 fell, according to the median forecast of 47 strategists surveyed by Bloomberg.

Taylor, whose firm manages the biggest hedge fund focusing on foreign exchange, said while the dollar may strengthen next year, it will fall to a record low against the euro in 2010 and to a 13-year low of 80 per yen as soon as 2009.

The dollar fell to 90.88 yen as of 11:28 a.m. in London from 91.21 in New York on Dec. 12. It declined to $1.3479 per euro from $1.3369.

Full article here

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6 Responses to “Dollar Staggers as U.S. Unleashes Cash Flood, Deficit”

1. Alex (not Jones) Says:
   December 15th, 2008 at 5:44 am

   are you buying gold and silver yet?

2. kindle Says:
   December 15th, 2008 at 10:04 am

   Should we invest with Peter Schiff?

3. Dion Says:
   December 15th, 2008 at 4:56 pm

   I certainly am, you are foolish if your not

4. LEVIATHAN Says:
   December 15th, 2008 at 6:16 pm

   Precious metals will not save anything. They can not help this society as it has been allowed to become. When people who have saved all their lives for retirement loose all, what can be done. Maybe they should just start over and try to do better next time of course most will not have time enough to start over. Maybe they should have known that medicine would soar in cost and that greed would never be satisfied even with more being given to the rich through tax cuts and special treatment. Maybe the average American who is called upon to support both the RICH and POOR, is just a fool and will not mind loosing all for the further enrichment of the elite. We will soon find out.

5. Rich Says:
   December 15th, 2008 at 8:19 pm

   Precious metals won’t save anything but your savings. As far as the “economy” is concerned the stretched necks of a few dozen bankers at the top will make an excellent start in renovations, in my opinion of course.

6. william b travis Says:
   December 16th, 2008 at 1:22 pm

   gold and silver are not as safe as you think
   roosevelt nationalised the us gold supply
   under penalty of ten years hard labor
   obama is being touted as the new roosevelt
   is he going to do the same?