Obama spending puts dollar on death watch as UN panel recommends ditching US currency

[darrels joy]

Obama spending puts dollar on death watch as UN panel recommends ditching US currency as world reserve

http://www.floppingaces.net/2009/03/...erve-currency/

[darrels joy]

Dollar Declines Most Since 1985 Plaza Accord on Fed Bond Buying

By Ye Xie
March 21 (Bloomberg) -- The dollar dropped the most against the currencies of six major U.S. trading partners since the Plaza Accord almost a quarter-century ago as the Federal Reserve’s plan to purchase Treasuries spurred speculation that it’s debasing the greenback.
“What it introduces is the problem of the currency to the extent that the Fed is buying what isn’t desired by foreign holders,” said Bill Gross, co-chief investment officer of Pacific Investment Management Co., in an interview on Bloomberg Television on March 19. “The Fed can keep interest rates where they want to keep them, at least for a 6- to 12- to 18-month period of time, but it will have consequences down the road.”

The U.S. currency weakened beyond $1.37 per euro this week for the first time since January as the central bank’s decision to increase its balance sheet by $1.15 trillion lowered yields, making American assets less attractive. The Norwegian krone and the New Zealand dollar rallied as the Fed’s move spurred advances in commodities.

The dollar depreciated 4.8 percent to $1.3582 per euro yesterday, from $1.2928 on March 13. The U.S. currency touched $1.3738 on March 19, the weakest level since Jan. 9. The dollar also fell 2.1 percent to 95.94 yen from 97.95. The euro increased for a fifth week versus the yen, gaining 2.9 percent to 130.29 after touching 130.49 yesterday, the highest level since Dec. 18.

The ICE’s trade-weighted Dollar Index dropped 4.1 percent this week to 83.84, the biggest decrease since the week in September 1985 when the U.S., U.K., France, Japan and West Germany agreed at New York’s Plaza Hotel to coordinate the devaluation of the dollar against the yen and deutsche mark.

Fed’s Announcement
The U.S. currency tumbled 3.4 percent versus the euro on March 18, the biggest drop since the 16-nation currency’s 1999 debut, when the Fed unexpectedly announced at the end of its two-day policy meeting that it will buy up to $300 billion of Treasuries and increase its purchase of agency mortgage-backed securities, a policy known as quantitative easing.

“The dollar’s decline this week has more or less priced in the policy response,” said David Woo, global head of foreign- exchange strategy at Barclays Capital in London, in an interview on Bloomberg Television. “Over the next three months, I don’t see much downside for the dollar to the extent other central banks will be under pressure to follow the Fed’s lead and essentially go down the route of quantitative easing.”

Stocks advanced this week, while crude oil had a fifth week of gains, the longest winning streak in 11 months. The Standard & Poor?s 500 Index increased 1.6 percent. Crude oil rose above $50 a barrel.

Norway’s Krone
Norway’s krone was the best performer versus the dollar among the major currencies, increasing 7 percent this week to 6.377, the biggest advance since 1973. The Australian dollar gained 4.4 percent to 68.69 U.S. cents, extending its advance in March to 7.5 percent. Crude oil is Norway’s largest export, while raw materials account for 60 percent of Australia’s overseas sales.

Colombia’s peso increased 3.6 percent to 2,359 per dollar, while the South Korean won appreciated 5 percent to 1,412.25 on demand for emerging-market assets.

“The rise in risk appetite may be sustained in the near term, which would make the dollar weaker still,” a team led by Vincent Chaigneau, head of fixed-income and currency strategy at Societe Generale SA in London, wrote in a research note yesterday. “We remain skeptical about the durability of that run, but still believe that the newly found dollar weakness could last.”

Treasury Yield
The yield on the benchmark 10-year Treasury note dropped the most since January 1962 on the day of the Fed’s announcement and fell 0.26 percentage point this week in its biggest decrease since December. At 2.63 percent, the yield was 0.34 percentage point lower than that of the comparable-maturity German bund. The gap widened 0.16 percentage point from a week earlier, making U.S. assets less attractive.

“We would by no means assume that the reaction to the Fed’s quantitative-easing announcement has run its course,” Credit Suisse Group AG currency strategists led by London-based Ray Farris wrote in a research note yesterday. “Fed purchases of Treasuries are likely to be quite problematic for the U.S. dollar, particularly given large foreign holdings of Treasuries and the loss of yield support for the dollar that Fed purchases have caused.”

Foreigners hold about half of the marketable Treasury debts that are outstanding. China, the biggest foreign holder, with $740 billion, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe, Premier Wen Jiabao said at a press briefing in Beijing two weeks ago.

Goldman Sachs Group Inc. raised on March 19 the target on its bet against the dollar to $1.40 per euro, and Citigroup Inc. recommended on the same day that its clients buy the euro versus the dollar.

The yen fell to a three-month low against the euro as the Bank of Japan bought government notes and made subordinated loans to banks to spur the economy. The stretch of weekly declines was the longest since July.

http://www.bloomberg.com/apps/news?p...efer=worldwide#

[darrels joy]

China calls for new reserve currency

By Jamil Anderlini in Beijing
Published: March 23 2009 12:16 | Last updated: March 23 2009 23:24

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.



“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.

Although Mr Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.

“The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,” Mr Zhou wrote.

China has little choice but to hold the bulk of its $2,000bn of foreign exchange reserves in US dollars, and this is unlikely to change in the near future.

To replace the current system, Mr Zhou suggested expanding the role of special drawing rights, which were introduced by the IMF in 1969 to support the Bretton Woods fixed exchange rate regime but became less relevant once that collapsed in the 1970s.

Today, the value of SDRs is based on a basket of four currencies – the US dollar, yen, euro and sterling – and they are used largely as a unit of account by the IMF and some other international organisations.

China’s proposal would expand the basket of currencies forming the basis of SDR valuation to all major economies and set up a settlement system between SDRs and other currencies so they could be used in international trade and financial transactions.

Countries would entrust a portion of their SDR reserves to the IMF to manage collectively on their behalf and SDRs would gradually replace existing reserve currencies.

Mr Zhou said the proposal would require “extraordinary political vision and courage” and acknowledged a debt to John Maynard Keynes, who made a similar suggestion in the 1940s.

http://www.ft.com/cms/s/0/7851925a-1...nclick_check=1

[MORTARDUDE]

It is all part of the global plan. Bankrupt us ( we are almost there now ) and start using a new global currrency to replace dollars....

Larry

[39mto39g]

global currency backed by whom? The UN? Ha, Ha, Ha.
Here’s a thought UN, Move out of the United States, we need more condos in New york and the UN is a bunch of free loading wimps that just want the US to pay the way. Go away.

Ron