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Drop in capital flow to U.S. poor dollar omen
Fri Feb 16, 2007 7:21AM EST
NEW YORK (Reuters) - An unexpected drop in demand for U.S. financial assets in late 2006 bodes ill for the dollar unless December's data on capital flows released on Thursday proves an anomaly instead of the start of a trend.
During the month, foreign private investors cut their purchases of U.S. securities by two thirds and U.S.-based investors plowed a record amount of cash into international stock markets. This resulted in a net $11 billion of capital leaving the U.S. financial system in December, the U.S. Treasury Department said on Thursday.
It marked the first net outflow of capital in two years. The weaker-than-expected Treasury International Capital (TICs) data triggered a bout of dollar selling, which was exacerbated by weak U.S. industrial production data released just afterward.
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The dollar has been propped up in recent years by strong demand for U.S. Treasuries, especially in Asia, where the U.S. trade deficit is most pronounced.
But with returns in foreign stock markets a better bet, U.S. investors have sent cash overseas and in the process sold dollars to buy those foreign securities. Non-government foreign investors have also gone the same way.
For the U.S. to return to an inflow scenario, foreign and U.S. investors would again have to see the U.S. as the best place to invest based on risk and return.
"One number doesn't make a trend ... but it's going to totally heighten expectations for the next figure," said Tim Mazanec, senior currency strategist at Investors Bank & Trust in Boston. "If it comes out (with a January inflow of) $120 billion, people would see (December) as a one-off but if we get back-to-back $15 billion (outflows), you don't want be long the buck." http://www.reuters.com/article/reutersEdge/idUSN1535653620070216
Dollar Fell after Fed Bernanke`s Testifies by Yan Xu
The dollar fell across the board on Bernanke's not-that-hawkish remarks. The euro rose from 1.31 to 1.3150 against the dollar, and the sterling also strengthened 50 pips against the dollar following his talk.
Federal Reserve Chairman Ben Bernanke started his two-day semi-annual testimony today. He said signs of inflation pressures are starting to ease, raising expectations for a Fed rate cut later this year.
Earlier in today¡¦s trading, the dollar was little changed after an in-line US economic report. Excluding automobiles, core retails sales rose at a monthly rate of 0.3% in January, unchanged from the previous month.
same here....
slackin!
Sorry for not posting in a few.......
busy trading and ,on the forex traders board..
I believe we saw a correction,but I belive the dollar will end this week on a bid tone.I still believe the dollar will break out to the top side of this range...
We have Dollar moving news comming out at 8:30 am tomorrow..
By the way the market is acting , I'm thinking the dollar is setting a bear trap..
Nahhhh looks like one fo 2MAR$ dtops
also got a box forming watch which way it breaks for the next leg direction
kind of scary up here red candle at resistance plus bumping into the 200 day MA
Should the USD overtake this minor double-top resistance I think it will gain some more
Profiles of the US economy...
http://www.fms.treas.gov/bulletin/b2006-4poe.doc
85,85,85.10
do I hear 20? 85.20..85.20..85.20..Do I hear 40? 85.40..85.40..85.40......86..87...88..90..????
Dollar is strong...Place your bets..The CaT see's up.
NEW YORK, Jan 26 (Reuters) - U.S. Treasury debt prices wee little changed on Friday after bargain-hunting and technical buying erased early losses incurred on unexpectedly strong reports on durable goods orders and new home sales.
Yields briefly rose to five-and-a-half-month highs on economic data that supported views the Federal Reserve would hold benchmark interest rates steady in the coming months.
"We were very oversold so we were poised to rally," said Thomas di Galoma, head of U.S. Treasury trading at Jeffries & Co. in New York.
In afternoon trade, benchmark 10-year notes , which fluctuate with inflation expectations, had erased early losses and were unchanged from Thursday's closing levels, yielding 4.88 percent. Bond yields and prices move inversely.
Early in the session, U.S. government data showed demand for long-lasting, big-ticket items such as airplanes and heavy machinery rose 3.1 percent in December, above a median 2.5 percent forecast increase and November's 1.6 percent gain.
New home sales also rose more than expected, growing at an annualized 1.120 million unit rate in December, above an upwardly revised 1.069 million pace for November and a median forecast of 1.050 million units.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsnews&storyID=2007-01-26T185053Z_01...
The dollar has been trading very stong today..
I posted this on the forex traders board ,but I think it should also be posted here..video is very choppy ,but its the audio that you want.Listen to the whole thing before making judgement..
only if these guy stop selling Treasuries....
OPEC Dumps Treasuries at Fastest Pace Since 2003 on Oil Slide
By Bo Nielsen and Daniel Kruger
Jan. 22 (Bloomberg) -- OPEC nations are unloading Treasuries at the fastest pace in more than three years as crude oil prices tumble, sending bond yields higher.
Exporters including Indonesia, Saudi Arabia and Venezuela, sold 9.4 percent, or $10.1 billion, of their U.S. government debt securities in the three months ended in November, according to Treasury Department data. Members of the Organization of Petroleum Exporting Countries last sold Treasuries for three straight months in June 2003.
Oil producers have surpassed Asian central banks as the largest pool of global savings, accumulating an estimated $500 billion in 2006 alone, according to research by Pacific Investment Management Co. The sales during those three months mark a reversal because OPEC countries have boosted their holdings of U.S. government bonds by 70 percent to $97 billion in the past 17 months, Treasury data show.
``There will be a significant sell-off,'' Joseph Stiglitz, a Nobel laureate and economics professor at Columbia University in New York, said in an interview. ``Medium-term and long-term yields will go up.''
Oil producers, including non-OPEC countries, have disclosed almost $200 billion of U.S. government, corporate and agency bonds, said Ramin Toloui, who helps manage about $641 billion for Newport Beach, California-based Pimco, a unit of Munich- based Allianz SE. The holdings are split about evenly between securities due in less than a year and those with longer maturities.
Higher Yields
Treasury 10-year note yields were unchanged at 4.78 percent last week, with the price of the 4 5/8 notes due in November 2016 finishing Jan. 19 at 98 26/32. Yields on two-year notes rose 4 basis points to 4.92 percent. A basis point is 0.01 percentage point.
OPEC members are selling Treasuries because crude prices have declined 34 percent from a record high of $78.40 a barrel in July. They are reducing demand for U.S. government bonds at the same time as central banks from China to Romania say they want to reduce holdings of dollar-denominated assets.
For every $10 drop in the price of a barrel of oil, OPEC members adjust Treasury holdings by about $34 billion, according to estimates by Michael Pond, an interest-rate strategist in New York at Barclays Capital Inc. Selling that amount would raise yields by 0.05 percentage point, he said.
Yields on the benchmark 10-year note have climbed 35 basis points from a 10-month low in December as economic data on housing and employment suggested the Federal Reserve would not cut its target rate for overnight loans between banks from 5.25 percent before June.
Investing `Petrodollars'
Short-term yields have remained above those on longer-term securities since mid-August. That situation, known as an inverted yield curve, has occurred only 11 percent of the time in the past two decades, according to Bloomberg data. Traders watch that difference because four of the past five recessions have been preceded by inverted yield curves.
``The pickup in oil revenues and the recycling of the petrodollars'' was one reason for 10-year yields falling as low as 4.33 percent last year, said George Goncalves, a fixed-income strategist in New York at Bank of America Corp.
`Money to Invest'
OPEC export revenue will decline by about $42 billion by the second quarter, from a peak of $126 billion in the third quarter of 2006 as oil prices tumble, according to estimates from commodity analysts at Charlotte, North Carolina-based Bank of America. Crude for February delivery fell $1 last week to $51.99 a barrel on the New York Mercantile Exchange.
``Lower oil prices mean less inflation pressure, but that doesn't seem to be going on,'' said Stiglitz of Columbia. ``The dollar has been subjected to a great amount of exchange-rate volatility, and it's not a good store of value anymore.''
OPEC countries increased holdings of U.S. government bonds by 115 percent from 2002 to 2006 when the price per barrel rose almost tripled, according to Treasury data.
They still hold more Treasuries than in 2005, when oil prices jumped 41 percent.
``Oil prices are still high compared to the long-run average, and that leaves the oil-producing countries with money to invest in U.S. Treasuries,'' said Torsten Slok, an economist at Deutsche Bank AG in New York.
Deutsche Bank estimates Middle East countries will stop investing in U.S. securities should oil decline to $30 a barrel. Oil averaged $33.28 a barrel for the 10 years ended in 2006.
Foreign Reserves
The oil exporters in the Middle East, Asia, Africa and South America bought an average of $2.5 billion of U.S. fixed- income securities in the 12 months ended in May 2005, when crude oil averaged about $42 a barrel, Goncalves said. Purchases jumped to $7.3 billion a month from June 2005 through August 2006, when oil averaged about $60 a barrel, he said.
``When you bring the oil price down, that's going to take a lot of excess money off the table,'' said Andrew Brenner, head of global fixed income for New York-based Hapoalim Securities USA, which has $70 billion under management.
Only Japan, China and the U.K. own more Treasuries than the 12-OPEC nations, according to Treasury data released last week. The OPEC data doesn't include securities owned by Russia and Norway, which account for 40 percent of oil producer reserves, according to Toloui at Pimco.
Central bankers in oil producers Venezuela, Indonesia and the United Arab Emirates have said they will invest less of their reserves in dollar assets.
China, the second-largest holder of U.S. debt, also is cutting back holdings. The central bank, which owned $346.5 billion of Treasuries as of November, trimmed purchases by 1.7 percent in the first 10 months of 2006, Treasury figures show.
``The Chinese are slowing down their buying, so that leaves a big hole after the oil money,'' said Brenner at Hapoalim Securities.
To contact the reporter on this story: Bo Nielsen in New York at Bnielsen4@bloomberg.net ; Daniel Kruger in New York at dkruger1@bloomberg.net .
London session should be interesting..
and I believe the euro will go down against the dollar.
check the comparison chart of the USD and the EURO
A rose by any other name is still a Rose....
UP..
the dollar chart with the bull flag as the handle for the cup maybe lol
It's starting to look ripe...
This move will surprize alot of investors.
And absolutly I am not a betting man........
Perhaps a betting CaT !
:]
aren't you?
US dollar gains today..
On its way to .86+?
if I were a betting man..?
Absolutly....
Dollar index,
showing a bull flag in an uptrend (bullish)..
guess we should see a break out very soon..My timming is off ,but I still stand by my earlier post of seeing the dollar @ .86-..Soon.
A few days later?
By Clare Black
LONDON (Reuters) - Gold will eke out modest gains in 2007 and 2008 due mainly to expectations of dollar weakness, but its performance will be far less impressive than in the past couple of years, a Reuters poll showed on Tuesday.
The global poll of 42 analysts carried out over the past month forecast a median price for gold <XAU=> of $651.25 a troy ounce in 2007, up 6.4 percent from a median average of $612.10 in 2006 but down nearly 6 percent from the 2007 price forecast in the previous poll undertaken in July last year.
Prices were seen up by just over half a percent more to $655 in 2008. Gold rose by 23 percent in 2006 and by 18 percent in 2005. Spot was trading around $625 on Tuesday.
Silver, by far the top performer in 2006, also had the strongest growth potential in 2007, but platinum was seen down around one percent and by another nine percent in 2008.
"Gold will have a solid but not spectacular 2007. Commodities as an investment class are getting increasingly disparate, with first gas, then oil and now copper falling off the wagon," said Matthew Turner, analyst with UK consultancy Virtual Metals.
"This must be making investors nervous about the rest."
DOLLAR BEARS
http://today.reuters.com/news/articlenews.aspx?type=reutersEdge&storyID=2007-01-16T131818Z_01_L1...
We had the Empire State Business Conditions Index come out today..looks like manufacturing isn't so hot in NY state,
we have market moving news comming out tomorrow..and I heard they are not expecting the numbers to so hot..time will tell,the USD has surprized us in the past..
didn't show us what we wanted here...but I have lost no faith.
I'd like it to consolidate here / maybe make a little bull flag...
Looking at the daily,
either this is the forming of a evening star (bearish) or......... if you read between the lines........higher low and higher high...? or ....tweezer tops?
I see it as a dollar day tomorrow.....for no reason other than contrarian thinking.
this is exactly what happened w. the stock market.
Bears were all around. Only to get wedgied =)
I know charts look short on USD.........
I predict......
UP. Why ..giggle ,giggle....I just have a feeling.
Give or take a few days.
I looks like EURUSD is going sub 1.28 before Feb rolls around at this rate. Eurozone should have raised rates like the Brits did. Now everyone is going to run the GBP/x's for the carry. Means more money will flow out of the UK consumers into foreign investments and more demand for Sterling. Make a dollar an hour on 100k GBPJPY. If you can get 7 lots you're making minimum wage. lol. A welfare system only capitalists could appreciate.
With all due respect I think the ECB is going to raise rates. Its inevitable. With everyone lifting they have to do the same despite their economy. Same reason BOJ did it despite mixed reports. The US kept lifting until the BOJ was forced to do so. Those are the discrepancies you look out for.
and it's still flying.
$USD Matthew Frailey Chart Weekly 2 (longer term)
$USD Matthew Frailey Weekly Chart
$USD Matthew Frailey Monthly Chart
was just thinking $USD index taps 85 before backing off a tad...
consolidation yes as my previous post---was just what I was thinking the doctor ordered.
What's MrLava saying still thinking EUR to 1.4 or???
Guess I'll have to read up meself : )
Good thinking there....IDK...I'm not biased to the move.
I think dollar could stand to rally more, but, again, gold can go to 0 now! LOL.
Looks / sounds to me like market is pricing in the increased likelihood of a rate hike rather than a cut. If this was indeed the case, perhaps inspiring some short covering on the part of speculators, then indeed the rallying would probably end soon and we could see either some consolidation or gradual grind down...
I think what we are going to see for the next few weeks with the dollar is sideways tradingbetween.85-.83....after that unless something happens ,expect the dollar to trend down
well it looks like to me a Bear flag..a bearesh trend that looks about ripe..possible 1 more trading day up maybe 2 ..then down.........just my opinion on seeing a bear flag on the charts....
$USD 3 yrs daily
$USD 3 yrs weekly
another $USD chart w/ RSI/MACD/ADX
gonna keep moving you reckon?? I look at gold and ask: going to $600 or $586?? #msg-16018320
a tear up..= a smile .. ;]
USD is testing it's bottom trend line after the major decline of Thanksgiving.
Watching for a breakdown or higher low established...
Chichi's post #msg-15069692
Dollar Bears Maybe Overreaching
By Marc Chandler
RealMoney.com Contributor
11/24/2006 8:49 AM EST
A run on the dollar is under way. While momentum suggests there is scope for additional near-term losses, the risk is the dollar bears are getting ahead of themselves.
Rather than jump aboard what appears to be a southbound dollar express, traders might be better advised to take some profits and wait for the next train.
In London trading, the dollar was recently trading at 115.75 yen vs. 116.30 yen late Thursday, while the euro traded above $1.30 for the first time since April 2005 and was recently at $1.3088.
The dollar's selloff is taking place in relative thin market conditions and there is reason to suspect that as full liquidity returns, the bears will have a more difficult time. The move already is extreme. Consider, for example, that the major foreign currencies (euro, British pound, Swiss franc and Japanese yen) rarely move more than two standard deviations away from their 20-day moving average. The European currencies are currently trading at more than three standard deviations from their 20-day moving average while the yen is just shy of the three-standard-deviation mark, which comes in near 115.48 yen to the dollar.
While the edges of the dollar's range may fray, a true and sustained break may be more difficult to achieve than it might appear. It was only about six weeks ago that the market was contemplating an upside break for the dollar. The euro was pushed through the $1.2500 level and the dollar recorded its high for the year against the Japanese yen just shy of the 120 yen level. Several banks revised their dollar forecasts higher. But alas, there was no breakout, which only served to deepen the gloom among speculative players.
On a related note, there are many new participants in the current market attracted to what seemed like easy money. Barriers to entry to the foreign exchange market have been reduced by the advent of technology and in particular, numerous electronic platforms, some of which extend leveraging virtually unheard of before, like 100 to 1 and even more.
In order to justify the lucrative fees being paid to hedge funds and commodity trading advisors, these market participants need an increase of volatility and ideally a strong trend. And lo and behold, over the past few days, volatility has increased as the dollar has been sold off to the bottom of its five-to-six month trading range.
While these players have successfully broken the dollar out of its well-worn ranges, it has yet to be seen whether it will force the hand of corporations and investors. The low-volatility environment may have made some corporations and investors complacent about hedging their dollar exposures.
Getting them to sell dollars would extend the greenback's selloff, and finally reward the speculators trading prowess. But I recommend money managers and U.S. corporations take advantage of the recent market action to hedge a greater portion of their exposure to foreign currencies.
It Ain't Going to Be Easy
The dollar's gyrations have once again coincided with swings in the pendulum of expectations of Federal Reserve policy. A week ago the fed funds futures were pricing in about a 1-in-6 chance of a Fed rate cut in March. The odds have since increased to almost 50%.
But there is good reason to take the Federal Reserve's tightening bias seriously. As one money manager told me in recent days, the consensus for the better part of two years underestimated the magnitude and duration of the tightening cycle. Remember the start of the year, the consensus was for "one and done" under former Chairman Alan Greenspan?
Ahead of the next FOMC meeting on Dec. 12, there are about 10 public speeches scheduled for Fed officials, including several from among the more hawkish members. Another three speeches will be delivered by Chairman Ben Bernanke and Vice-Chairman Donald Kohn, both of whom should stay on message: the risks of inflation are still greater than the downside risks to growth.
Moreover, Richmond Fed President Jeffrey Lacker seemed to have indicated the price of giving up his dissent against the Fed's recent decision to pause: tougher talk against inflation.
While price pressures have eased a bit, they still are elevated. As data for October begins to come in, it is likely to provide preliminary signs that the economy is performing better in the fourth quarter than in the third. And we might learn in a few days that third-quarter GDP was revised slightly higher. The labor market is tight and early estimates for November non-farm payrolls (reported Dec. 8) are for an increase of 125,000
Europe and Japan
Beyond the Fed, European politicians and finance ministers may increasingly voice their objections to further euro appreciation. Already the French President and Prime Minister have protested. After meeting with the Spanish Prime Minister last week, French President Chirac intimated that his concerns about euro appreciation are shared by others.
The risk is that the best of the euro-zone cyclical recovery is behind it. A combination of higher taxes, higher interest rates and a stronger euro will likely undermine growth in the quarters ahead.
Meanwhile, the Japanese government downgraded its assessment of their economy for the first time in nearly two years. As I have argued, Japan continues to be plagued by its perennial problem: strength of the corporate sector has not trickled down to Japanese employees in the form of income, which in turn deters consumption.
This leaves the economy heavily dependent on capital expenditures and exports. Yet both of these sectors are flashing warning lights. In the third quarter, exports accounted for nearly 80% of Japan growth. The October trade balance, released on Nov. 21, was well below forecasts because exports were weak. Recently there have been signs that capital investment has weakened, despite surveys picking up strong intentions. Bank lending has also slowed.
Although Bank of Japan Governor Fukui had purposely kept the door ajar to a December rate hike, the recent data prompted him to acknowledge that the odds of such a move are slight. That means that most likely the overnight rate will remain a lowly 25 basis points for at least a while longer.
By the time the hike is delivered, it is likely that several central banks, including the European Central Bank, will have raised official rates at least once, maintaining interest rate differentials, which provide traders with powerful incentive to use the yen as a financing currency.
In recent days, the low-yielding Japanese yen and Swiss franc, have fully participated in the move against the dollar. This does not appear to be an indication of unwinding carry trades because the other side of the carry trades have held up well.
The Australian dollar is near its year's high and the New Zealand dollar is near its best level in nine months. Equity markets, which may have been financed through the sale of the yen and/or Swiss franc, have continued to rally (except in Japan). Most emerging market currencies have also held up better than one would have expected if the carry trades were truly being unwound.
Carry trades -- borrowing a lower-yielding asset to invest in a higher-yielding one -- arguably make sense when the dollar is range bound. However, during a run against the greenback, there is less of an appetite to be short the yen and Swiss franc.
By buying these currencies back, traders in essence are using the dollar as a financing currency -- betting that the dollar's decline more than offsets the less favorable interest rate pick-up. However, if the dollar snaps back and returns to its previous ranges, the yen and Swiss franc carry trades may return to popularity.
thanks for that link Bob.
A good one.
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