Dollar/baht Don't Read Unless You Have A Interest

[BEENTHEREDONETHAT]

From what I heard on the news this morning the UK does not need to pump $$ into the system as the US is also covering their (the UK's) bad US debts.

Some day Japan & china are going to recognise that buying the US bonds ( to support the US debt) is not a good deal and then watch things really turn to crap.

[glyph]

"...the predictions are that it is true the Baht is supposed to hit 45 December..."

Huh? A prediction is only true, if what was predicted actually happened. We won't know if that prediction is true, until December.

[Naam]

From what I heard on the news this morning the UK does not need to pump $$ into the system as the US is also covering their (the UK's) bad US debts.

Some day Japan & china are going to recognise that buying the US bonds ( to support the US debt) is not a good deal and then watch things really turn to crap.

japanese and chinese (as well as other) central bankers are not that stupid that they have not recognised that since years. both countries (especially China) do NOT have any other choice than to convert their trading surplus into U.S. debt or just keeping the cash dollars.

[cloudhopper]

From what I heard on the news this morning the UK does not need to pump $$ into the system as the US is also covering their (the UK's) bad US debts.

Some day Japan & china are going to recognise that buying the US bonds ( to support the US debt) is not a good deal and then watch things really turn to crap.

japanese and chinese (as well as other) central bankers are not that stupid that they have not recognised that since years. both countries (especially China) do NOT have any other choice than to convert their trading surplus into U.S. debt or just keeping the cash dollars.

Why is this Naam? Why can't they buy oil, building materials etc. with their USD?

[Naam]

From what I heard on the news this morning the UK does not need to pump $$ into the system as the US is also covering their (the UK's) bad US debts.

Some day Japan & china are going to recognise that buying the US bonds ( to support the US debt) is not a good deal and then watch things really turn to crap.

japanese and chinese (as well as other) central bankers are not that stupid that they have not recognised that since years. both countries (especially China) do NOT have any other choice than to convert their trading surplus into U.S. debt or just keeping the cash dollars.

Why is this Naam? Why can't they buy oil, building materials etc. with their USD?

a whole bunch of reasons exist. i don't want to go into lecturing but try to keep my answer as simple as possible as well as concentrating on the main reasons.

China and other nations which have since years a dollar trading surplus and keep the lion share of their reserves in dollars are riding a tiger. it's safer riding a tiger than getting off. the latter would mean a dollar depreciation of unimaginable extent which would not only diminish the value of their reserves but upset the tightly interwoven globalized economies of many countries. on top of that China would lose a good part of its competitiveness which is maintained by artificially keeping the Yuan down. political pressure from the main trading partner -the U.S.- and trade barriers or penalty import duties would be another negative result.

of course dollars can be and are used to buy oil or any other commodity but only up to the extent what is needed and what strategic storage capabilities are able to absorb. any excess is still and remains... excess. getting rid of it by converting into other currencies... see first paragraph.

to put things in perspective: the flow of dollars into China by trade surplusses and FDIs averaged 800,000,000 (eighthundred million) dollars per calendar day in 2007! and there won't be much change in 2008.

[ray23]

From what I heard on the news this morning the UK does not need to pump $$ into the system as the US is also covering their (the UK's) bad US debts.

Some day Japan & china are going to recognise that buying the US bonds ( to support the US debt) is not a good deal and then watch things really turn to crap.

The question wasn;t based on conjecture but this news release of last week.

"Central Banks Offer Extra Funds to Calm Money Markets (Update2)

By John Fraher and Simon Kennedy

Sept. 18 (Bloomberg) -- The Federal Reserve, the European Central Bank and the Bank of Japan united with their counterparts around the world to offer an additional $180 billion to markets facing their worst crisis since the 1920s.

The Fed said it authorized central banks to auction the funds to ``to address the continued elevated pressures in U.S. dollar short-term funding markets.'' Policy makers ``continue to work together closely and will take appropriate steps to address the ongoing pressures,'' a joint release said. The Bank of England, the Bank of Canada and the Swiss National Bank also participated.

Finance officials have struggled to restore confidence in markets this week as concern mounted more banks will follow Lehman Brothers Holdings Inc. into bankruptcy. The cost to hedge against losses on U.S. government debt climbed to a record yesterday, the U.K. government was forced to sponsor a rescue of mortgage lender HBOS Plc and Russia poured money into its banks.

``There's a complete lack of faith in the markets,'' said Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London. ``There's a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act.''

Limit Doubled

The Fed said the ECB has been authorized to double its existing limit to $110 billion from $55 billion and the Swiss central bank can offer an extra $15 billion. New swap facilities with the Bank of Japan, the Bank of England and the Bank of Canada amount to $60 billion, $40 billion and $10 billion, respectively.

The Bank of Japan said its dollar-swap agreement will be conducted ``appropriately in view of the prevailing market conditions.'' That statement was published after its policy board held an emergency meeting in Tokyo today.

The action is the latest attempt by central bankers to coordinate their response to the financial crisis. In December, they joined forces to boost dollar liquidity around the world after interest-rate reductions in the U.S., the U.K. and Canada failed to ease concerns about bank lending.

The announcement boosted European shares and U.S. futures, which have been pummeled this week as contagion spread through financial markets. Europe's Dow Jones Stoxx 600 Index, which has dropped 8 percent this week, gained 0.8 percent to 260.15. Futures on the Standard & Poor's 500 Index added 1.2 percent. More than $19 trillion has been wiped off the value of global stock markets since Oct. 31.

Failure to calm markets will see central banks inject even more cash, said Robert Barrie, an economist at Credit Suisse Group in London. Other options central banks could take include accepting greater collateral denominated in foreign currencies and increasing lending to banks abroad.

``The lack of dollars has been making the financial crisis worse around the world, which is why we now have this coordinated response,'' Barrie said.

To contact the reporters on this story: John Fraher in London at [email protected]; Simon Kennedy in Paris at [email protected]

Last Updated: September 18, 2008 05:03 EDT "

Edited September 22, 2008 by ray23

[ray23]

the hand a writings on the wall gentlemen if your a dollar earner, get ready to suck it up again. Obvious what is goign to happen if they adopt this plan and I have very little doubt that they will. I definetly believe commodities including Oil is going to be on the rise again, therefore inflation.

You know I don't know about everyone else, but relying these guys judgment, is a scarry prospect to me, since they didn't step up to prevent or had a lot to do with waht got is here in the first place

"Dollar May Get `Crushed' as Traders Weigh Up Bailout (Update2)

By Bo Nielsen and Anchalee Worrachate

Sept. 22 (Bloomberg) -- Treasury Secretary Henry Paulson's plan to end the rout in U.S. financial markets may derail the dollar's three-month rally as investors weigh the costs of the rescue.

The combination of spending $700 billion on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds will boost U.S. borrowing as much as $1 trillion, according to Barclays Capital interest-rate strategist Michael Pond in New York. While the rescue may restore investor confidence to battered financial markets, traders will again focus on the twin budget and current-account deficits and negative real U.S. interest rates.

``As we get to the other side of this, the dollar will get crushed,'' said John Taylor, chairman of New York-based International Foreign Exchange Concepts Inc., the world's biggest currency hedge-fund firm, which manages about $15 billion.

The dollar fell against 14 of the world's most-traded currencies on Sept. 19, including the euro, as Paulson unveiled the plan, while the Standard & Poor's 500 Index rose 4 percent. The plan may end the rally that began in June and drove the U.S. currency up 10 percent versus the euro, 2 percent against the yen and almost 13 percent compared with Brazil's real, strategists said.

Paulson's plan, sent to Congress Sept. 20, would mark an unprecedented government intrusion into markets and increase the nation's debt ceiling by 6.6 percent to $11.315 trillion. Officials may also start a $400 billion Federal Deposit Insurance Corp. pool to insure investors in money-market funds.

Dollar `Downdraft'

``The downdraft on the dollar from the hit to the balance sheet of the U.S. government will dwarf the short-term gains from solving the banking crisis,'' said David Woo, London-based global head of foreign-exchange strategy at Barclays, the third- biggest currency trader, according to a 2008 survey by Euromoney Institutional Investor Plc.

Paulson and Federal Reserve Chairman Ben S. Bernanke began plotting the rescue last week after New York-based Lehman Brothers Holdings Inc. filed for bankruptcy, the government seized control of American International Group Inc. and Merrill Lynch & Co. was forced into the arms of Charlotte, North Carolina-based Bank of America Corp.

Morgan Stanley dropped as much as 44 percent Sept. 17, the biggest one-day decline in its history, and Goldman Sachs Group Inc., where Paulson was chief executive officer from 1998 to 2006, lost 26 percent. Both are based in New York.

Dollar Hegemony

The dollar fell 0.4 percent to $1.4530 per euro as of 8:27 a.m. in London, after dropping 1.7 percent in the week to Sept. 19. It slid 1 percent to 106.33 yen, extending last week's 0.5 percent decline.

In the four days following Lehman's bankruptcy, the ICE future exchange's Dollar Index, which measures the currency's performance against the U.S.'s six biggest trading partners, dropped 1.2 percent. It fell 0.3 percent today, leaving it 1 percent higher this year.

``After years of doubting the hegemonic status of the dollar, this proves it's still there,'' said Stephen Jen, London-based head of research at Morgan Stanley. ``But of course this situation is definitely not stable. The capital leaving the emerging markets is only going into the dollar and that's a powerful force. It's a very uncomfortable balance.''

By the end of the year, the euro will weaken to $1.43 and the yen will trade at 108 to the dollar, according to analyst surveys by Bloomberg. The dollar will depreciate to 1.65 against the real, compared with 1.83 on Sept. 19.

Growth, Deficits

Although the dollar may suffer short-term, at least one analyst says the U.S. government's planned rescue will strengthen the currency before long. Paulson's proposals will return foreign-exchange markets to the trend of the past months, according to Adam Boyton, senior currency strategist at Frankfurt-based Deutsche Bank AG, the world's biggest currency- trading bank. Since the end of June, the Dollar Index has gained 7.2 percent.

``It's a positive plan that's ultimately good for the dollar,'' said New York-based Boyton. ``It reduces risk and volatility and gets the focus back on macroeconomic fundamentals, which suggest weakness throughout the rest of the globe next year, with returning strength in the U.S.''

The U.S. economy may expand 1.5 percent next year, according to the median estimate of 80 analysts surveyed by Bloomberg. That compares with 1.1 percent for the euro-region and 1.15 percent for Japan, the world's second-largest economy.

`Huge New Supply'

The rescue comes as the U.S. budget deficit and the current-account balance, the broadest measure of trade, grow. The Congressional Budget Office projects the spending shortfall will increase to $438 billion next year from $407 billion. The current account deficit is up from $167.24 billion in December.

``Investors may start to worry about the amount of debt the U.S. is taking on and its impact on the dollar,'' said Geoffrey Yu, a currency strategist in London at UBS AG, the second- largest foreign-exchange trader. ``The fact that they mentioned taxpayer money implies that they're going to issue debt. If there's going to be a huge new supply of Treasuries, this will be dollar negative. It's too much for the dollar to take.''

Traders are also concerned the bank bailout will spread to other U.S. industries suffering from the credit crunch that's holding back an economy growing at its slowest pace since 2001. Detroit-based General Motors Corp., the world's biggest automaker, said last week it will tap the remaining $3.5 billion of a $4.5 billion credit line to pay for restructuring costs.

`Damaged' Currencies

Lower interest rates may also weigh on the dollar. Futures on the Chicago Board of Trade show there's a 38 percent chance policy makers will lower their target rate for overnight lending between banks to at least 1.75 percent by January from 2 percent currently. A month ago, they showed a 46 percent chance of an increase to 2.25 percent.

Rates in the U.S. are already the lowest of any the Group of 10 industrialized nations except Japan, where they are 0.5 percent. The European Central Bank's benchmark is 4.25 percent.

Another drawback for the dollar is that the Fed's key rate is 3.4 percentage points less than the rate of inflation, the most since 1980, so investors lose money by investing in short- term U.S. fixed-income assets.

``People thought that the Fed was done cutting,'' said Andrew Balls, an executive vice president and member of the investment committee of Newport, California-based Pacific Investment Management Co., which oversees almost $830 billion. ``In the longer term the diversification away from the dollar will remain intact. The U.S. hasn't done itself any favors in making its assets attractive to foreign investors.''

Brazil, Australia

The biggest beneficiaries may be Brazil's real and Australia's dollar, as demand for higher-yielding assets rebounds, according to Goldman Sachs. The two currencies, the biggest losers versus the dollar since July, may rebound 7.7 percent and 4.6 percent, respectively, the next two weeks, Goldman Sachs forecasts.

``The currencies that have been damaged the most have the best growth,'' said Jens Nordvig, a strategist with Goldman Sachs in New York. ``You're going to see a lot of flows back into these currencies now.''

To contact the reporters on this story: Bo Nielsen in Copenhagen at [email protected]; Anchalee Worrachate in London at [email protected]

Last Updated: September 22, 2008 03:34 EDT "

[Kf6vci]

The Baht is overvalued. but the Dollar is headed South, too.

apart from a worrysome trend of keeping major expenses off balance sheet and off the budget, the USA are talking about adding to the national debt. this gotta drive up the yield.

[Naam]

The Baht is overvalued. but the Dollar is headed South, too.

apart from a worrysome trend of keeping major expenses off balance sheet and off the budget, the USA are talking about adding to the national debt. this gotta drive up the yield.

a logical conclusion/prediction which i hear since more than two decades but... it has never become true.

Edited September 22, 2008 by Naam

[BigSnake]

Ray23, my guess is it will range between 33 and 34baht to the dollar; let's face it the Bank of Thailand(BOT) is at the control at the moment. No doubt about this they are prompting up the baht. I wonder what would happen if we had a repeat of 2 July 1997?? HMMMMMM!! I hear tell Former PM Chalvit maybe in Mr Somchai cabinet.(???)

[Naam]

USD/THB 33.68 / 33.40 scb 08.15

[flying]

They may not have known how to care for company's in a normal manner. But, they sure knew how to take care of themsleves. In the end I think they had those contracts written so that they couldn't lose. Some board agreed to it why?

What a happened to simple logic in this decade?

True

When I was a kid ( probably the 60's ) I remember reading a story about the future. To make a long story short it was about a space travel problem.

Seems the rockets had gotten to heavy for the distance required. Computers were a big part of that weight.

Suddenly a scientist runs up screaming he has the answer. He proceeds to show the other scientists with a piece of paper & a pencil how 4x4=16 etc....

They had rediscovered manual thinking & saved a ton in weight reduction computer wise.

Perhaps those boards you mentioned were all using those new fangled pay rate calculators.

[ray23]

I'm getting used to phrases like crushed and the great depression. They no longer have the same effect as they did before after a year or so of it.

Well one thing for sure one of those two guys rinning fir offuce are going to inherit one heck of a National Debt. I'm really concerned that the push is to be get this through through in a week, It takes longer then that for them to get their shoes on for a meeting.

If you listen to the entire plan not a bad as it looks on paper if they follow through. It is to buy those assets. hold them for period of time until there is more recovery and sell them on the open market to and apply it to the debt.

Two things I see one avoiding a fire sale. Secondly that pork I talked about. You know my district needs this money flowing there instead of to the debt. Just as they have done with the Social Security System. If that happens then the debt will not be reduced at all.

The fact that were thinking of extending this to auto manufactoring from the beginning put a shiver up my spine. That is the same industry that has walked out on strikes time and time agian, They could survive that. They can survive down time now. It's pork, they need the time to redesign and retool and produce the cars that are needed in today's world not the SUV of the past ten. There is no better time then right now. They can be competative and recover without the tax payers.

Regulating Wall street that is going to be a real chore and a uphill battle all the way. They don't want to be regulated. I don't think either canidate is prepared for that battle. I' m hoping ego doesn't get in the way. Hoping they kind find the right people to step in a take the heat form the Wall Street community. Never forget our system takes tremendous amounts of money to get elected. That money comes from Power brokers. Where do you find them knee deep in Wall Street. Another term in four years, someone is goign to want a second term and one will want their first one. So in my humble opinnion elected official are not the ones to do that job.

In that one there is a long way between proposal and getting the job done. I'm sure that all the hot shots with the golden parachutes are just going to roll over.

The difference between Thai Politics here you buy votes, there you buy the canidate. I'm willing to bet the best person for the job is not even on the ballot. I can not recall in my lifetime where it wasn't the lesser of two evils. But that is democracy, hardly perfect. I'm not a political person so all I will only say I was hoping to see a diferent John McCain then I have seen.

Play this right and the effects won't be as bad. We see that payback to th goverment, we see no pork, we see the reuglation and it might just turn out OK and we may just end up with a more realisitc system then rewarding failure.

But going back to the dollar, how are people going to precieve this do you think anyone has faith enough in these guys to think they will stay to plan? I don't.

You know it's time all American's to go back to basics from the top down. The country was not built on devising different ways of accounting to make yourself look good. It we was built from producing things better and better all the time and selling them. Wall street funded it didn't build it. What have we done for the past 20 year, took are tradesman and made them fast food cooks.

Given the knowledge away to countries who in the end only want to compete with us, have completly different standards of living and now produce the same products for less. Wall Street funded it. So now Wall Sreet is in trouble who do they want to bail them out, the same people they into made fry cooks, interesting isn't it.

Wahat does the average guy have to do, start by not buying till he has the money, save that money instead of sticking it on a peice of plastic. Aftre I came here I dont even have a credit card. I could get one here. But, I donlt want it. I have learned my listen, if I dont have cash it can wait until I do. But that took six years to regain what I lost in the move. There are two things financed in my life my home and my car, 12 more easy payments the car is paid for. Frankly if it wasn't for the rain I would have never bought it. It w more of a want then a need. Motorcycles are cheaper and you can do just about the same things with them. So it not a need I needed transportation I had that without a bill. I know cause use the bike most of the time and for the first two years it was all I had. In the end it probably worth it still has less then 20K on it and will be paid off before it reaches 25K, so I have years of service left in it. But, it could have waited and i would have saved a ton of interest on it.

The house most American can't cash out for a house, they are just to expensive. somewhere along the American dream went from owning a house to renting from the Mortgage company. I remember my parents actually owned houses, not making payments on them. Were they mansions, not hardly, but they met the need, not the want.

We have gotten our needs and wants very confused. Today do I have the house, does it meet all my wants, no but close enough to work towards owning it early on. That I one that will cost me a whopping 5K penalty to pay off early. The other things you finance here for the most part you pay the full balance on the loan from day one no matter what you do. So the other loans are not a good deal here, you are trapped by wants.

As I have said it has to change from the bottom all the way to the top. Needs firsts wants can wait. Now do the banks and finance companies want you to think that way. Oh hel_l no, as little as a year ago they didn't evne care if yuo could pay it back. They did some creative accounting and borroweed ( leveraged money) through Wall street and schmucks like us funded it.

You make life evne more interesting how much is the averagre American giving to countries that hate them. We have become the worlds Police department and they don't want it. Let the UN do it. if they can't fund it doesn't happen simple as that. If the world really wanted if they would pony up the money.

Did I paint a picture that is really all that different around the world I don't think so, we have seen the elephant and we paid a huge price for it, around the world.

So when I look at all this do I see the dollar gaining strength on it's own merit no, but America wasn't the only country financing wants, so there is hope yet. But I don't see it this year. Dont' think so drive down ring road and look at all the repos sitting around, Something you didn't see here only five years ago. As a matter of fact a tenth of the used car lots you see today.

So the world went trough tremendous changes in the last five years and if you look you can see it here better then anywhere I have ever been before. How did that happen here by finacing wants and instead taking care of needs just like Ameica. It caught up to America, it will catch up to Thailand too, sooner then later. From that we will get a better rate of exchange, Just got to wait. Rght now it's hidden by clever accounting.

For this to get back on track it is going to take more them any government can do.

[Naam]

Ray23, my guess is it will range between 33 and 34baht to the dollar; let's face it the Bank of Thailand(BOT) is at the control at the moment. No doubt about this they are prompting up the baht. I wonder what would happen if we had a repeat of 2 July 1997?? HMMMMMM!! I hear tell Former PM Chalvit maybe in Mr Somchai cabinet.(???)

what makes you so sure?

[LindsayBKK]

Can't compare yank economy with thai economy. Like comparing a grain of salt to a planet.

Yes which one is the grain of salt? If AIG went under yank would have been grain of salt.

[ray23]

Sometimes don't you want to yell hey! stupid wake up and smell the coffee it's the dollar.

"Record single day increase in oil prices

By Agencies

The price of oil jumped $16.37 to $120.92 per barrel today, its biggest single-day gain ever.

At one point during today's wild trading session, the price of crude sold on the New York Mercantile Exchange soared as high as $130 per barrel, a whopping 24 percent increase from Friday's closing price.

Oil had been sliding since reaching its all-time high of $145.29 in July, and that decrease brought drivers some relief from this summer's punishing gasoline prices, which soared above $4 per gallon. But since bottoming out last Tuesday at $91.15 per barrel, oil's price has risen 32 percent.

Stunned analysts blamed Monday's jump on Wall Street's continuing crisis. Investors uncertain about the government's $700 billion financial system bailout plan flocked to oil as a relatively safe haven for their cash. "

[ray23]

Well LaoPo, Naam, Vic, Midas what say Ye , G-7 goign to step up to the plate. Seems a bit far fetched to me but these days who knows. Actually saw the dollar strengthen agian today

Dollar Intervention Risk `Meaningful' on Volatility (Update3)

By Ye Xie

Sept. 29 (Bloomberg) -- A growing number of currency traders and strategists are starting to speculate that finance ministers from the world's biggest economies will join to support the dollar.

Volatility in currencies is the highest since 2000, when the so-called Group of Seven nations last intervened in the foreign-exchange market. The dollar weakened 2.5 percent on a trade-weighted basis in the past two weeks as the turmoil on Wall Street intensified. It had the biggest one-day drop against the euro since 2001 a week ago.

While the dollar strengthened 9 percent from its record low against the euro on July 15, wider price swings threaten to undermine confidence in the U.S. currency just as government borrowing rises and U.S. lawmakers prepare to

vote on Treasury Secretary Henry Paulson's plan to bail out the nation's banks. The greenback is still down 23 percent since 2005.

``We're getting closer to the right conditions for authorities to step in and prop up the dollar,'' said Maxime Tessier, who manages $151 billion as head of foreign exchange in Montreal at Caisse de Depot et Placement. ``The nightmare scenario will be a wholesale loss of confidence in the dollar.''

The dollar rose to $1.4337 per euro at 8:26 a.m. in London from $1.4614 on Sept. 26 after weakening 2.7 percent in the previous two weeks. The broader U.S. Dollar Index was at 78.202.

Even a hint that finance ministers might influence exchange rates may be enough to set a floor under the currency after efforts by the Federal Reserve, European Central Bank and Bank of Japan failed to revive investor confidence by injecting more than $1 trillion into the world financial system.

`Extraordinary Interventions'

``The central banks of the world have embarked on all sorts of extraordinary interventions,'' said Stephen Jen, the global head of currency research at Morgan Stanley in London. ``Currency joint intervention would be the least surprising. And it would probably be the cheapest.''

Morgan Stanley's intervention watch index suggests an 18 percent chance that policy makers will step into the market to influence exchange rates. Any reading above 10 percent suggests the risk is ``meaningful,'' or elevated, according to the New York-based firm.

The index, based on interest rates, trading patterns and investor positions, is accurate 78 percent of the time. The index is at the same level as when the G-7 intervened in 2000.

Finance ministers from the G-7 are more concerned about rapid swings in exchange rates than the absolute level of currencies because volatility complicates the assessment of economies, interferes with monetary policy and gives companies little time to adjust by cutting costs.

`Sharp Fluctuations'

Sadia SA, Brazil's second-biggest food company, posted a 760 million-real ($410 million) loss last week related to foreign-exchange hedges after the nation's currency tumbled 26 percent from a nine-year high on Aug. 1.

The G-7, which includes the U.S., Japan, Germany, Britain, France, Italy and Canada, warned in April against the implications of ``sharp fluctuations in major currencies,'' the first time since 2004 that the group used such language. Shoichi Nakagawa, Japan's new finance minister, reiterated that view on Sept. 26, saying ``sharp fluctuations in the foreign exchange market aren't good.''

Implied volatility on one-month euro-dollar options rose to an eight-year high of 15.55 percent on Sept. 18, the same level that triggered the G-7 to buy euros in 2000 to halt the 27 percent slide from its 1999 debut. Volatility gained to 14.93 percent from 14.51 percent last week, up from this year's low of 8.02 percent on Aug. 1.

U.S. Growth

Weakness in the dollar hasn't become so disruptive to suggest imminent intervention, said Ken Jakubzak, who manages the KML Currency Program in Chicago for KMJ Capital LLC, which has $100 million under management.

The currency is 3 percent stronger than its record low in March on a trade-weighted basis. Some investors say the currency may rally as the economies outside the U.S. slow.

Growth in the euro-zone will decelerate to 1.35 percent this year from 2.63 percent in 2007, according the median estimate of economists surveyed by Bloomberg. Japan's economy may expand 1 percent, compared with 2.08 percent, while the U.S. economy will likely grow 1.7 percent, the surveys showed.

The dollar will rally to $1.43 by year-end and to $1.40 by the end of the first quarter, according to the median estimate of more than 40 economists and strategists surveyed by Bloomberg.

``Should the bailout plan succeed in stabilizing the markets, the sentiment will shift to be more constructive for the dollar,'' said Jakubzak, who expects the dollar to rise to $1.30 by year-end. ``What happens in the U.S. will also happen in the other places in the world.''

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.

Barclays, TD

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.

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.''

The government depends on foreign money to finance the budget deficit because investors outside the U.S. own 56 percent of the $4.8 trillion in marketable Treasuries outstanding, up from 42 percent five years ago, according to data compiled by the government.

`Been Crushed'

While the G-7 decided against intervening in April when the dollar fell below $1.60 per euro for the first time, tolerance for a weaker currency may be limited because of the turmoil sweeping the financial system. The next meeting is scheduled for Oct. 10 in Washington.

In the past month, the government took over Washington- based Fannie Mae and McLean, Virginia-based Freddie Mac, the two biggest mortgage finance companies, as well as New York-based American International Group Inc., the largest U.S. insurer. New York-based Lehman Brothers Holdings Inc. went bankrupt and Washington Mutual Inc. of Seattle was seized by regulators in the biggest bank failure in U.S. history.

``At the end of the day, the financial sector is our flagship,'' Kenneth Rogoff, a professor of economics at Harvard University, and a former chief economist at the International Monetary Fund, said in an interview on Bloomberg Radio Sept. 19. ``It has been crushed, and that's going to have a big impact on international capital flows. That's going to affect the positions of the dollar in the global financial system.''

To contact the reporter on this story: Ye Xie in New York at [email protected]

Edited September 29, 2008 by ray23

[Naam]

Well LaoPo, Naam, Vic, Midas what say Ye , G-7 goign to step up to the plate. Seems a bit far fetched to me but these days who knows. Actually saw the dollar strengthen agian today

that the dollar would strengthen on any (even slightly) positive outcome concerning the bail-out was expected. i am watching USD/€UR like a hawk but can't make up my mind whether to get out of my cash-$ or still wait a bit. by the way, i don't believe in G7 or any other intervention.

[lannarebirth]

I would only echo the quote of that great technical anayst Carl Swenlin, by saying, " Don't think, LOOK! "

[chiang mai]

that the dollar would strengthen on any (even slightly) positive outcome concerning the bail-out was expected. i am watching USD/€UR like a hawk but can't make up my mind whether to get out of my cash-$ or still wait a bit. by the way, i don't believe in G7 or any other intervention.

I think Naam that is the mode many many people are in presently, including myself with USD/GBP.

[Naam]

that the dollar would strengthen on any (even slightly) positive outcome concerning the bail-out was expected. i am watching USD/€UR like a hawk but can't make up my mind whether to get out of my cash-$ or still wait a bit. by the way, i don't believe in G7 or any other intervention.

I think Naam that is the mode many many people are in presently, including myself with USD/GBP.

CM, good to know that i am not the only one who can't make up his mind asked wife. answer "how would i know?" asked dog. answer "skip stupid questions and gimme german sausage!"

[Naam]

I would only echo the quote of that great technical anayst Carl Swenlin, by saying, " Don't think, LOOK! "

LOOK at WHAT LRB?

[chiang mai]

Almost certainly the answer will be, the technical view.

[Naam]

Almost certainly the answer will be, the technical view.

what about those of us who are no voodoo priests? i have killed animals when hunting but never slaughtered a chicken to read from its entrails

[ray23]

Tried the chicken coudn't catch it. So I flipped a coin landed on the edge and didn't fall.

I think things have progressed beyond any norm that most of us have seen.

So it's all a new ball game

Seeing the effect on the pound and the Euro, there has to be more to this then the plan in the states.

I don't see the connection to those countries financial instution's unless they were holding bogus paper as well?

And here I thought my heros were going to lead to the promised land.

[Naam]

Tried the chicken coudn't catch it. So I flipped a coin landed on the edge and didn't fall.

I think things have progressed beyond any norm that most of us have seen.

So it's all a new ball game

Seeing the effect on the pound and the Euro, there has to be more to this then the plan in the states.

I don't see the connection to those countries financial instution's unless they were holding bogus paper as well?

And here I thought my heros were going to lead to the promised land.

of course they are holding bogus papers. not some but GALORE! besides belgian Fortis a german bank (Hypo Real Estate) cropped up during the weekend which needs (according to the latest news) 35 billion €URos (50 billion dollars) of liquidity to keep it afloat. 27 billion €URos (~39 billion dollars) by the german taxpayers, the rest from other banks. deal already agreed.

[ray23]

It's amazing to me that we have not see that much fallout in Thailand yet.

The states have been so center stage, with it's plan really haven't heard much about the UK and Europe in comparison. It would appear greed could be an international problem.

I think we are all going to have a tough time ahead.

[britmaveric]

Yep - lot of European, Asian banks will be hurting equally as much because of dodgey investments.

[chiang mai]

And it does appear that global markets are all very dismissive of the American bail out plan and that USD may well be headed for retreat, yet again - I think it might be time to implement Plan B.

Edited September 29, 2008 by chiang mai

[lannarebirth]

Yep - lot of European, Asian banks will be hurting equally as much because of dodgey investments.

Only when the tide goes out do you discover who's been swimming naked. - Warren Buffet