SevenEyedJeff
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- May 31, 2007
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http://bloomberg.com/apps/news?pid=20602081&sid=aiqcgCwMmXIs&refer=benchmark_currency_rates
In the article (which can be viewed from the link above), there are those who expect the dollar to strengthen if the markets stabilize in response to the bailout plan, and if economies outside the US slow down, but there is another view toward the bottom of the article, which I find more believable and have posted below:
Paulson Plan
U.S. lawmakers are reviewing a tentative agreement to revive credit markets by authorizing a $700 billion plan to buy troubled assets from financial institutions. ``The deal is done,'' said Senator Judd Gregg, a New Hampshire Republican, a ranking member of the Budget Committee. The House and Senate may vote Sept. 29 on it, he said.
Dollar bears say the U.S. budget and trade deficits and negative real interest rates make a sustained dollar rally unlikely. Paulson's plan to buy devalued securities from banks would drive U.S. government debt above 70 percent of gross domestic product, the most since 1954, based on economist estimates and details of the bailout.
If the Treasury spends the entire amount next year, it would drive next year's budget deficit to $1 trillion or more from about $500 billion now. Michael Feroli, an economist at JPMorgan Chase & Co. in New York, estimated the combination of the Paulson plan, additional government expenditures, and a slower economy, may swell the deficit to $1.5 trillion, or 10 percent of GDP.
Barclays, TD
The currency will drop to $1.57 per euro by year-end, according to London-based Barclays Plc, the world's third-largest foreign exchange trader. Toronto-based TD Securities, a unit of Canada's second-biggest bank by assets, said it will weaken below $1.60 in the next few months.
``Authorities don't want excessive dollar weakness to feed the sell-America mentality,'' said Chris Turner, head of foreign exchange strategies in London at ING Groep NV, the largest Dutch financial-services company. ``We are not there yet, but the risk is there. People I speak to are worried about a budget explosion.''
In the article (which can be viewed from the link above), there are those who expect the dollar to strengthen if the markets stabilize in response to the bailout plan, and if economies outside the US slow down, but there is another view toward the bottom of the article, which I find more believable and have posted below:
Paulson Plan
U.S. lawmakers are reviewing a tentative agreement to revive credit markets by authorizing a $700 billion plan to buy troubled assets from financial institutions. ``The deal is done,'' said Senator Judd Gregg, a New Hampshire Republican, a ranking member of the Budget Committee. The House and Senate may vote Sept. 29 on it, he said.
Dollar bears say the U.S. budget and trade deficits and negative real interest rates make a sustained dollar rally unlikely. Paulson's plan to buy devalued securities from banks would drive U.S. government debt above 70 percent of gross domestic product, the most since 1954, based on economist estimates and details of the bailout.
If the Treasury spends the entire amount next year, it would drive next year's budget deficit to $1 trillion or more from about $500 billion now. Michael Feroli, an economist at JPMorgan Chase & Co. in New York, estimated the combination of the Paulson plan, additional government expenditures, and a slower economy, may swell the deficit to $1.5 trillion, or 10 percent of GDP.
Barclays, TD
The currency will drop to $1.57 per euro by year-end, according to London-based Barclays Plc, the world's third-largest foreign exchange trader. Toronto-based TD Securities, a unit of Canada's second-biggest bank by assets, said it will weaken below $1.60 in the next few months.
``Authorities don't want excessive dollar weakness to feed the sell-America mentality,'' said Chris Turner, head of foreign exchange strategies in London at ING Groep NV, the largest Dutch financial-services company. ``We are not there yet, but the risk is there. People I speak to are worried about a budget explosion.''
