Dollar Drops to Record Low Against Euro on Speculation Fed Plan Won't Work

[Purveyor]

Source: Bloomberg News

March 12 (Bloomberg) -- The dollar fell to a record below $1.55 per euro on concern that the Federal Reserve's plan to provide funds to banks won't be enough to break the gridlock in money-market lending and stem credit losses.

The U.S. currency erased more than half of yesterday's 1.6 percent rally versus the yen, the biggest in six months, which came after the Fed said it would extend $200 billion of credit to financial institutions to spur lending. Traders bet the Fed will cut rates by as much as three quarters of a percentage point next week to avert a recession, while the European Central Bank keeps borrowing costs unchanged.

``It's difficult for the dollar to gain traction,'' said Paresh Upadhyaya, who helps manage $50 billion in currency assets at Putnam Investments in Boston. ``The Fed is probably running out of options; the market is fixated on interest-rate differentials, which are clearly negative for the dollar.''

--
Forward contracts to buy United Arab Emirates dirhams rose the most in two weeks after Economy Minister Sultan Bin Saeed Al Mansouri said the dirham's dollar peg is ``contributing'' to record inflation.

A Qatari official denied in a telephone interview that Gulf central bankers will consider dropping the dollar peg when they meet next week. Gulf countries are under pressure to revalue their currencies or drop dollar pegs after the U.S. currency fell 10 percent against the euro last year and the Fed cut rates. The weaker dollar boosts the cost of imports from Europe, while Gulf states have to follow rate cuts, stoking inflation.



Read more: http://www.bloomberg.com/apps/news?pid=20601103&sid=aWK9fKuKM0_A&refer=news

[fascisthunter]

1. It Won't Work

It just made our debt larger...

[InkAddict]

2. Yup. n/t

[bhikkhu]

20. Inevitably diluting $ confidence further.

As we dig our hole deeper. The inflation caused by massive money creation is as bad as consequences of not rescuing the markets - though it does distribute the pain throughout the entire system.

[Winterblues]

3. The dollar has lost fifty percent of it's value since Bush*/Cheney

Should give Republicans something to strut over..

[BB1]

4. Damn, now I have to change that 3 dollar coin

into a 2 euro coin and change...

[SpiralHawk]

5. "D'oh. Like it had a chance of working. Smirk. Shock and Awe, Baby. Smirk." - Commander AWOL

[Uncle Joe]

15. Ok, who's up for another beer with the Prez? n/t

[9119495]

6. My trip to Europe this summer is getting VERY expensive.

[GOPNotForMe]

7. Mine, too! Tracking the dollar is wrecking my nerves...

[9119495]

9. Since mine is a honeymoon...

I just figure it is worth it. Plenty of time to build up the bank account later.

[aquart]

17. Niagara Falls. Traditional. Cheap.

[flygal]

13. try living here

and being paid in US dollars - :scared: we're actually working out a COL adjustment - last one was 2004!

[9119495]

14. Actually, I'm considering it...

You're saying accept Euros or nothing?

If you don't mind me asking, what kind of salary would I need in dollars to have a nice middle class existance in Europe? (in your opinion)

[jimnasium]

8. The next great depression is right around the corner.

buh bye dollar. c u in a few years.

This whole mortgage crisis is sheer madness - and it's going to tank our economy.

Thanks *!

asshat.

[dipsydoodle]

10. All sing

Goodbye, Dollar We Must Leave you to the tune of Goodbye,Dolly Gray

[Strelnikov_]

11. With rates this low, may be time to take out a loan

to buy barter goods for sale later.

[dipsydoodle]

12. Old saying in economics

Inflation favours net borrowers.

[aquart]

16. What "speculation"? We KNOW it won't work.

[eppur_se_muova]

18. Euro tops $1.55 for first time (BBC)

The euro has set a new record high against the US dollar, rising above $1.55 for the first time.

Scepticism about whether the Federal Reserve's plans to provide liquidity to the banking system will work was one factor weakening the dollar.

The new high was set at $1.5559 before the European currency fell back slightly to trade at $1.5552.

Speculation that the United Arab Emirates is about to abandon its dollar peg also weakened the US currency.

The euro chalked up its biggest daily gain in more than two years, rising 1.5%.
***
more: http://news.bbc.co.uk/2/hi/business/7292366.stm

[pfitz59]

19. I have Euro investments....

They almost cover the Equity I lost in my home!