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Dollar's Decline Speeds Up, With Risks for U.S

9 points by chailatte 16y ago

zach 16y ago
Here's a Google redirect if anyone else can't read the article as linked: http://www.google.com/url?q=http://online.wsj.com/article/SB10001424052748703907004576279321350926848.html?mod=googlenews_wsj http://www.google.com/url?q=http://online.wsj.com/article/SB...
mikegreenberg 16y ago
The USD has been trending more strongly in relation to the NOK. (http://www.google.com/search?sourceid=chrome&ie=UTF-8&q=1+usd+in+nok http://www.google.com/search?sourceid=chrome&ie=UTF-8&#3...) Probably an irrelevant currency for most, but the Kroner has been extremely strong and independent (IMO). Can anyone explain how this trend relates to the above article?
- RockyMcNuts 16y ago
  Norway has oil and a huge sovereign wealth fund, compared to certain countries that import lots of oil and have lots of debt. See page 5 where they are listed as the least risky sovereign debt in the world (USA still #5, although the people who suggest not raising the debt ceiling are trying to change that) http://blog.stocktwits.com/sponsored-post-cma-global-sovereign-credit-risk-report-for-q4-2010/ http://blog.stocktwits.com/sponsored-post-cma-global-soverei...
  - mikegreenberg 16y ago
    But even with such independence, the only way to reconcile this article with my observation is to say that the NOK is weakening even faster than the USD. I don't see/understand how that's the case.
    - RockyMcNuts 16y ago
      Not sure I follow the math, since beginning of December NOK is up 14% against the USD, about 3% against the EUR http://www.google.com/finance?q=CURRENCY%3ANOKUSD http://www.google.com/finance?q=CURRENCY%3ANOKUSD
RockyMcNuts 16y ago
Been going on for a while - http://www.ritholtz.com/blog/2011/04/dollars-biggest-decline-2001-08/ http://www.ritholtz.com/blog/2011/04/dollars-biggest-decline... during the crisis the dollar strangely stopped declining partly due to a 'flight to quality', a lot of other countries were in even worse shape. When you need to sell a lot of debt to foreign investors, they need to think the currency is at a level where it won't decline too much in the future, and if they don't think that, the dollar goes down or interest rates go up.
vessenes 16y ago
I think it very likely that most of the US government is cheering a devalued dollar; weak dollar = significantly increased exports, and jobs. America really, really needs both of those right now. What's clear in the last few years is that nobody is going to shoot missiles or send troops over currency devaluation; this is a relatively simple way to boost your own country's economic strength. Since we're more decentralized than say, China, those who'd like devaluation can't just mandate it, but I'd be stunned if a weak dollar is seen as a bad thing by the current Administration.
- vessenes 16y ago
  p.s. The article imagines China dumping their $3T in US dollars; that would be a real surprise; it would cause more strain on the RMB-USD rates, and boost US exports.
hugh3 16y ago
I'm not surprised. I took advantage of the exchange rate to move a bunch of my Australian dollars across to US dollars last week. But I was earning about 6% on my savings account in Australia, and I'm only earning 0.1% in my savings account in the US. Obviously there's a huge element of pricing the interest rate discrepancy into the exchange rate, so one should expect the exchange rate to return to something more normal once the US economy starts growing again and interest rates become more reasonable. (Actually in related news, can anyone think of a good place to invest fifty thousand US dollars right now?)
- mikegreenberg 16y ago
  (Jokingly) I can think of a few upcoming companies that could turn that around for you in a few years. ;) (Seriously: And I'd love to pitch mine, if you're interested.)

9 points by chailatte 16y ago

zach 16y ago

Here's a Google redirect if anyone else can't read the article as linked: http://www.google.com/url?q=http://online.wsj.com/article/SB10001424052748703907004576279321350926848.html?mod=googlenews_wsj http://www.google.com/url?q=http://online.wsj.com/article/SB...

mikegreenberg 16y ago

The USD has been trending more strongly in relation to the NOK. (http://www.google.com/search?sourceid=chrome&ie=UTF-8&q=1+usd+in+nok http://www.google.com/search?sourceid=chrome&ie=UTF-8&#3...) Probably an irrelevant currency for most, but the Kroner has been extremely strong and independent (IMO). Can anyone explain how this trend relates to the above article?

RockyMcNuts 16y ago
Norway has oil and a huge sovereign wealth fund, compared to certain countries that import lots of oil and have lots of debt. See page 5 where they are listed as the least risky sovereign debt in the world (USA still #5, although the people who suggest not raising the debt ceiling are trying to change that) http://blog.stocktwits.com/sponsored-post-cma-global-sovereign-credit-risk-report-for-q4-2010/ http://blog.stocktwits.com/sponsored-post-cma-global-soverei...
- mikegreenberg 16y ago
  But even with such independence, the only way to reconcile this article with my observation is to say that the NOK is weakening even faster than the USD. I don't see/understand how that's the case.
  - RockyMcNuts 16y ago
    Not sure I follow the math, since beginning of December NOK is up 14% against the USD, about 3% against the EUR http://www.google.com/finance?q=CURRENCY%3ANOKUSD http://www.google.com/finance?q=CURRENCY%3ANOKUSD

RockyMcNuts 16y ago

Been going on for a while - http://www.ritholtz.com/blog/2011/04/dollars-biggest-decline-2001-08/ http://www.ritholtz.com/blog/2011/04/dollars-biggest-decline... during the crisis the dollar strangely stopped declining partly due to a 'flight to quality', a lot of other countries were in even worse shape. When you need to sell a lot of debt to foreign investors, they need to think the currency is at a level where it won't decline too much in the future, and if they don't think that, the dollar goes down or interest rates go up.

vessenes 16y ago

I think it very likely that most of the US government is cheering a devalued dollar; weak dollar = significantly increased exports, and jobs. America really, really needs both of those right now. What's clear in the last few years is that nobody is going to shoot missiles or send troops over currency devaluation; this is a relatively simple way to boost your own country's economic strength. Since we're more decentralized than say, China, those who'd like devaluation can't just mandate it, but I'd be stunned if a weak dollar is seen as a bad thing by the current Administration.

vessenes 16y ago
p.s. The article imagines China dumping their $3T in US dollars; that would be a real surprise; it would cause more strain on the RMB-USD rates, and boost US exports.

hugh3 16y ago

I'm not surprised. I took advantage of the exchange rate to move a bunch of my Australian dollars across to US dollars last week. But I was earning about 6% on my savings account in Australia, and I'm only earning 0.1% in my savings account in the US. Obviously there's a huge element of pricing the interest rate discrepancy into the exchange rate, so one should expect the exchange rate to return to something more normal once the US economy starts growing again and interest rates become more reasonable. (Actually in related news, can anyone think of a good place to invest fifty thousand US dollars right now?)

mikegreenberg 16y ago
(Jokingly) I can think of a few upcoming companies that could turn that around for you in a few years. ;) (Seriously: And I'd love to pitch mine, if you're interested.)