The dollar plunged to a 13-year low against Japan's yen Friday, as currency traders sensed a further-deteriorating U.S. economy on the heels of the U.S. Senate's rejection of the Big Three rescue package. The dollar plunged more than 3 yen -- an enormous move in the currency market -- to 88.40 early Friday before recovering slightly to 89.50 yen. The dollar also fell about one-quarter cent versus the euro to $1.3375 and one-half cent versus the Swiss franc to $1.1785.
Currency Trader Andrew Resnick told BloggingStocks Friday traders sense that U.S. stock investments will perform even worse now in 2009, as a disruption / cessation of operations by General Motors (NYSE: GM), Ford (NYSE: F), and Chrysler will further decrease commercial activity, and GDP -- making U.S. investments less attractive.
"Currency traders are running for the hills now. They're running out of U.S. investments, which is bearish for the dollar. The yen is rising primarily as a safe haven and as a risk-aversion play, as it typically has during the financial crisis," Resnick said. "Japan's economy isn't that strong, it's in recession too, but as long as it doesn't contract as much as the U.S., traders will prefer the yen over the dollar," Resnick added that he was presently long with the yen versus the dollar, and long with the yen versus the euro.
Further, Resnick said he expects the dollar to fall to 75 yen, if public policy efforts aren't revived to save the U.S. auto sector.
"There's really no reason to invest in the dollar right now, which should serve as a signal to U.S. politicians," Resnick said. "Given tight credit conditions, and declining corporate revenues, there is the potential for further financial system destabilization so the good folks in Washington need to come to their senses and get some type of rescue packaged passed."
Forex Analysis: It's probably a good time for the U.S. Treasury to step in with some type of small 'bridge loan' until Senate Republicans and Democrats can hammer-out their differences. Right now, aside from the flight-to-safety versus the yen, the dollar has held up reasonably well, in the face of 1-2 million more U.S. employees collecting unemployment. But, as Resnick noted, that could change in a hurry if the U.S. auto sector ceases to operate.
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Reader Comments (Page 1 of 1)
12-12-2008 @ 12:36PM
BHarrison said...
Quote from the article: "There's really no reason to invest in the dollar right now, which should serve as a signal to U.S. politicians,"
Hmmm . . . and with the professional managers of the institutional funds opting to buy "ZERO INTERESTS" T-Bills versus investing in the U.S. stock markets, doesn't that unequivocally demonstrate the instability of the market, esp. due to a lack of intergrity in the markets?
If the managers of institutional funds don't have the faith and confidence to invest in the market, then isn't anyone else CRAZY to invest in the market? these managers go where they think it is the "safest' place to invest the institutions' funds . . . and that DEFINITELY is NOT the U.S. Stock markets.
This being the case, then how are we going to get other countries to invest in the U.S. dollar to prop up the bail out . . . or, will our government just start "printing money" which will greatly devalue our savings even more.
CONGRESS IS THE PRIMARY CULPRIT in all of this economic debacle. None of this would have occured if theyhad implemented the basic, reasonable "oversight and regulation" of the FIs, the corporations, and the stock markets via the Fed, the SEC, etc. Instead, Congress "sold out" to the special interests groups, thereby enabling them to orchestrate and to perpetuate the pyramid and Ponzi schemes that caused our economy to crash. Bush was partly responsible; but it was MOSTLY due to the BLATANT CORRUPTION of CONGRESS . . . and the American people continue to tolerate the likes of Ms Pelosi, Mr. Reid, mel Martinez, and the infamous Barney Frank who are all still in charge of the recovery efforts.
12-12-2008 @ 12:53PM
BHarrison said...
""Evil" corruption persists, and bad men prevail, simply because "good men" do nothing".
It is easier for the corrupt to prosper and to prevail when good men do nothing to stop them; and they are not constrained by any regards for standards, ethics, or integrity. Good men become frustrated, especially when "the people" tolerate the corruption . . . and then good men sometimes join the coruption in order to survive competitively, and it becomes esier than trying to get "the people" to do anything about the corruption . . . it is a downward social and economic spiral.
people wind up with the corrupt government and business enterpirses that they deserve since "the people" allowed it all to occur.
At election time, the "election" is ALREAY OVER. The special interests groups already have limited the candidates on both sides to those who will serve the special interests groups. The candidates are "put up" and selected by the special interests at the RNC and DNC national conventions . . . they used the "super delegates" to statistically maintain control over the outcome of the nominations votes.
It is all contrived and orchestrated to keep the American people believing that they have a role in this process. it often is reminescient of outlandish move scripts.
If the "masses of American people" don't wake up and work to regain control of their country, then they ae going to become more and more impoverished. Too many people thought that this type of economic debacle and corruption could never occur in the U.S.A. . . . well, look around you; it HAS HAPPENED . . . and we are still just in the beginning of it all.
The America of "tomorrow" will be vastly different than the America of the 1950s.
12-12-2008 @ 2:24PM
Kent said...
The record low for the Yen was 79.00 back in 1994-1995 during the economic recovery in the U.S. buying up Japanese products. This time the yen is strengthening for the wrong reasons; it's a captial flight out of invisible trade rather than visible trade from the U.S. to Japan. What a laugh how situations change where Japan is considered a safe haven.