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  • Is the U.S. Dollar Near a Low vs. the Euro?

    Posted by Jonathan on December 4th, 2003 (All posts by )

    Sure feels like it but what do I know.

     

    10 Responses to “Is the U.S. Dollar Near a Low vs. the Euro?”

    1. Sylvain Galineau Says:

      So I got to sell the BMW already ? Blimey.

    2. Jonathan Says:

      No, the car, like gold, is a hedge against currency fluctuations. You can either hold onto it or sell it in the currency of your choice. (Except gold doesn’t depreciate, so the comparison isn’t perfect.)

      Besides, you would be foolish to rely on my market predictions.

    3. Sylvain Galineau Says:

      I would be indeed…

      More seriously and in general, it is foolish to rely on anyone’s predictions. For some reason, everybody has to learn that one the hard way though.

    4. Jonathan Says:

      Yeah. I learned it by following my own predictions.

    5. Sylvain Galineau Says:

      At least you got the millions from the ChicagoBoyz IPO as a consolation prize…

    6. Jonathan Says:

      Not much left after buying our MiG.

    7. Andy B Says:

      Heeeyyyyyyyy!. Whadya mean “our MiG”? I haven’t seen hide nor hair of that Ruskie plane!

    8. Jonathan Says:

      Relax, the auction isn’t over yet. I’m also budgeting for some spare parts and a consulting contract for a couple of those Polish female jet mechanics we’ve heard so much about.

    9. Clay Ranck Says:

      My question is this…The conventional wisdom is that the dollar is falling because of the deficits in the future and the resulting strain on the economy. However, Europe and Japan run large deficits as well as having greater demographic issues vis-a-vis pensions and such…so what gives? Is the fall in the dollar, especially against the euro, purely an interest rate play? This doesn’t hold true for Japan, though…

      Any takers for that question?

    10. Sylvain Galineau Says:

      Clay, there are many factors at play. Yes, deficits here are larger than there. Second, even though there is one ECB, the EU is actually a bunch of countries, each with different economies in different cycles, issuing different bonds and instruments…In other words, the currency is a front for a rather diversified portfolio. Third, interest rates are higher in Europe. Fourth, I think everybody likes it this way. As long as your currency is at the same level against the dollar – hence Asia buying a ton of Treasuries – and the dollar cheap in Europe, your exports will do OK. Fifth, the Administration wants a weaker dollar. Sixth, protectionist measures do not help currencies. Seventh, we are at war and the uncertainties and costs associated with this have to result in some kind of a risk premium compared less risky, boring, business-as-usual Europe. Eigth, debt in the US, whether at the government, corporate or individual level, is massive.

      There are many, many more and I probably forgot quite a few significant ones. The point is, many arguments point in the same direction.

      Demographic issues are long range. It will be years before the pension drama starts playing itself out and has an effect on futures markets.

      Also note, that the stockmarket rally also has something to do with a lower dollar, specially for large multinationals. It has boosted their profit and earnings growth.

      I’d think the dollar is a bit low compared to where it should be, just as the Euro was too low at 85c/US. Such is the nature of the beast.