Category: US Dollar

Congratulations on joining our community! Here is some important information:

The fact that you can read this shows that the article submission process is working. You’ll now start to receive UNIQUE articles that match your selected categories, up to the “daily maximum limit” you set.

If you no longer wish to receive articles, or you wish to change the maximum number of articles you receive each day, simply update your preferences in the UAW Control Panel.

Also check to see if you have enabled the special UAW link so that your readers can get their own unique version of this articles, thereby preventing you from suffering from the duplicate content filters. Look at the bottom of this article to see if this link is activated or not. Without that link people will simply copy the article directly from your site, which means they will be posting content that is a duplicate of yours. If their site happens to have higher rankings than yours, then your site will suffer from the duplicate filters.

If the link is activated, you can also earn 20% recurring commissions on any UAW signups resulting from people clicking on that link. That’s right - you can earn passive income just by publishing UAW articles on your site. If you haven’t already signed up for our free affiliate program, you can do so now here.

Indeed, why not also use the Wizard to promote your own sites? Sign up for your own subscription here.

Once again, welcome aboard! If you have any suggestions on how we might improve the Wizard, do let us know through our Helpdesk: http://allegrettopublishing.com/support/index.php .

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

The US Dollar continues to rebound against the Euro and to act like the Federal Reserve’s interest rate cutting spree is over, at least for now. With the actual inflation rate soaring the Fed is being forced to pay some attention to the inflation outlook for this year and next.

Against the Euro the dollar hit a low of just over 1.6000, then made a V reversal that quickly carried it to about 1.5350. Forex market traders noticed that at the May 28-29 FOMC meeting FOMC members expressed more concern about the inflation rate and came to the conclusion that further interest rate cuts, if any, would be quite small.

Of course with the Fed funds rate now at 2% the Fed has already used quite a lot of its interest rate cutting ammunition.

A bounce from the 1.5300 handle to just above 1.5500 was short lived and we are again trading in the 1.5300’s this morning. Against the Yen the dollar has made a similar comeback. From recent lows below 100.00 dollar/Yen quotes are now above 105.00.

With many soft commodity prices and energy prices making record highs the Fed has to be concerned about the inflation rate getting totally out of control. I don’t think that oil above $120.00 a barrel was in any one’s play book for the first half of 2008. With oil, wheat, corn , rice, and soybeans all at record or near record levels the two most sensitive inflation indicators for the public, food and gasoline, are racing to the upside.

Since the last G7 meeting about two weeks ago the price action of the US Dollar suggests that an important Dollar low and a change of direction may have been reached against the Euro. The Euro made an all time high against the Dollar at just above 1.6000 only three trading days ago. The 1.6000 level was a widely anticipated one by forex traders. Early Thursday morning on April 24, 2008 we are just under 1.5700.

The same type of price action can be seen in Dollar Yen. From a recent low of under 100.00 the Dollar is trading about 104.00 this morning and looks ready to move quickly to challenge the 105.00 level.

While a few days trading action does not make a trend the Dollar’s new strength must be respected. While the FED reserve will probably cut interest rates again at its’ April 28th and 29th meeting forex and bond traders expectations are now that the rate cut will be only by 0.25 basis points instead of the 0.50 basis point cut expected just a few days ago.

This change in sentiment is caused by the increased inflationary pressures that are occurring in the US and indeed around the world. With a lower Dollar helping to accelerate the increase of all imported goods into the US inflation has flared up in an alarming way, especially in crude oil prices and food prices.

The Fed has a tough decision to make at its next meeting. A 0.25 point rate cut would signal that the rate reduction business is over and that the Fed will begin to focus on fighting inflation even if it means that the economy slides further into a recessionary phase.

The US dollar remains under pressure on forex markets as the US recession begins to take its toll on the economy.

Late Friday’s NFP report could not have been good news for dollar bulls. The loss of 80,000 jobs was the third in a row of negative job creation numbers. The high probability is that the Federal Reserve bank will once again cut interest rates, probably by 50 basis points, at its meeting later this month.

The only thing worrying about forecasting a further significant drop in the US dollar is that it just looks like too easy of a call. But with a high probably that the US recession will get much worse before it gets better it is difficult to see a turnaround for the dollar anytime soon.

Of course, at some point the dollar will turn and probably very swiftly at that. But I expect that this will be at least a few months down the road. Before the dollar makes a true turn we will likely have at least a few days of true panic selling first. Perhaps a final moon shot where the Euro shoots up 1000 pips or so over just a few trading days. This could happen should a major US financial institution fail.

The current and probable near term actions of the Fed suggest that the US inflation rate will continue to accelerate. Only when it reaches a high enough level to frighten the Fed, perhaps to double digits even on the governments “friendly” CPI nonsense official indicator, will the Fed be likely to start to increase interest rates. At the first rate increase the dollar will likely make a true turn and race to the upside.