Dollar Slumps to Record on China's Plans to Diversify Reserves

After Rogers, Faber, Gross, Buffet & Giselle now China. Don´t know what will get the most press in the US....... I assume that they will soon find a CPI formula to back out the increased costs that will come sooner or later from the weakening $ . Maybe Bernanke shouldn´t run the Fed via the applause meter ( Fleckenstein ) from Wall Street ........ It will be interesting to see how the "vilgilant" (LOL!) bond market will react to the news... And i expect at least one speech from Paulson & Co that the "strong $ policy is still in place" LOL!

Nach Rogers , Faber, Gross, Buffet & Giselle nun China. Bin mir nicht sicher was in den USA mehr Presse bekommen wird..... Höchste Zeit für die Verantwortichen eine CPI Formel zu finden die getsiegene Importpriese aus den Inflationszahlen herausrechnen...... Evtl. wäre es eine gute Idee wenn Bernanke sich mal nicht von Wall Street diktieren läßt was er zu tun hat...... Bin gespannt wie der angeblich so wachsame Bondmarkt (LOL) auf die Neuigkeiten reagiert. Ich erwarte mindestens eine Rede von Paulson & CO das die "Politik des starken $ " weiter bestand hat.... Slapstick pur!

This cover seems to be timeless..... Dieses Titelbild scheint Zeitlos zu sein........

Introducing the Xera:

Thanks to the suggestion put forth by a reader of my daily column, I have come up with the new name for our currency. Henceforth, it shall be called the xera. That's a combination of Xerox, for the piece of Xerox paper that it is; lira, which in the past was one of the world's chronically weak currencies; and, most importantly, the fact that it sounds like zero. That is ultimately where the xera is headed.

via Fleckenstein ( see Blogroll )

Dollar Slumps to Record on China's Plans to Diversify Reserves
Nov. 7 (Bloomberg) -- The dollar slumped to a record low against the euro after a Chinese official said the government will buy better-performing currencies as it diversifies $1.43 trillion of foreign-exchange reserves.

``We will favor stronger currencies over weaker ones, and will readjust accordingly,'' Cheng Siwei, vice chairman of China's National People's Congress, told a conference in Beijing. The dollar is losing its status among the world's currencies, Xu Jian, a central bank vice director, said at the same meeting.

The dollar fell against 14 of the 16 most-active currencies, declining to the weakest versus the Canadian dollar since the end of fixed exchange rates in 1950, a 26-year low against the pound and a 23-year low to the Australian dollar.

China's Reserves
Chinese investors have reduced their holdings of U.S. Treasuries by 5 percent to $400 billion in the five months to August. China Investment Corp., which manages the nation's $200 billion sovereign wealth fund, said last month it may get more of the nation's reserves to invest to improve returns.

``The world's currency structure has changed,'' Xu from the People's Bank of China said at the conference. ``The dollar has been depreciating.'' Cheng, speaking to reporters after his speech, said his comments don't mean China will buy more euros.

The dollar’s slide: 1/3 down and falling faster / FT

• The US dollar has now lost more than a third of its value (-35%) against a basket of major currencies since Feb 2002.
• The decline is accelerating. The USD has shed -12.5% of its value in the last year, -3.5% in the last month, and -1.5% in the last week alone.
  
  

``Cheng has a history of speaking out on a range of financial market and economic developments, and his comments are not always accurate,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong.

Cheng's remarks on Jan. 30 that China's stock rally was a ``bubble'' caused the benchmark index to fall the most in almost two years on Jan. 31. The Shanghai and Shenzhen 300 Index, then over 2,500 points, has since climbed above 5,300.

The dollar's decline helped drive the price of crude oil to a record and gold to a 27-year high, encouraging investors to buy assets in commodity-producing nations. The dollar's 9.8 percent drop against the euro this year boosted the competitiveness of U.S. exports, helping shrink the nation's trade deficit to $57.6 billion in August, the smallest since January.

`Asset Story'
Against the pound, the dollar declined to $2.0955, the lowest since May 1981. It fell to $1.1010 per Canadian dollar. The currency slid against the Australian dollar to 93.89 U.S. cents, the lowest since April 1984 from 92.87 U.S. cents. The U.S. currency also fell to as low as 1.1347 against the Swiss franc, the lowest since December 2004.

``This is an asset story and shows sentiment for the dollar continues to be quite negative,'' said David Forrester, currency economist at Barclays Capital in Singapore.

The Australian dollar gained after the country's central bank raised its benchmark borrowing cost to 6.75 percent today. Governor Glenn Stevens, announcing today's quarter-point rate increase, said inflation will exceed his target.

> Gold is up over 15 bucks to 835$!

Janszen from iTulip on Gold

Thanks Eric!

Gisele no longer accepts dollars

This story is one for Peter Schiff when he tries to make his point on FOX and CNBC. Maybe this is something even Mark Haines & Co can understand....

Dieser Geschichte sollte Peter Schiff für seine nächsten Diskussionsrunden auf FOX und CNBC verwenden. Evtl. begreifen die ansonsten recht "einfach" gestickten Moderatoren dann besser den wahren Wert des Greenback.....


Gisele no longer accepts dollars
Nov. 5 (Bloomberg) -- Gisele Bundchen wants to remain the world's richest model and is insisting that she be paid in almost any currency but the U.S. dollar.

Like billionaire investors Warren Buffett and Bill Gross, the Brazilian supermodel, who Forbes magazine says earns more than anyone in her industry, is at the top of a growing list of rich people who have concluded that the currency can only depreciate because Americans led by President George W. Bush are living beyond their means.

When Bundchen, 27, signed a contract in August to represent Pantene hair products for Cincinnati-based Procter & Gamble Co., she demanded payment in euros, according to Veja, Brazil's biggest weekly magazine. She'll also get euros for the deal she reached last October with Dolce & Gabbana SpA in Milan to promote the Italian designer's new fragrance, The One, Veja reported. Bundchen earned $33 million in the year through June, Forbes reported in July.

``Contracts starting now are more attractive in euros because we don't know what will happen to the dollar,'' Patricia Bundchen, the model's twin sister and manager in Brazil, said in a telephone interview in September from Sao Paulo. She declined to discuss details of the arrangements last week, as did Anne Nelson, Bundchen's agent in New York at IMG Models.

Jim Rogers Shifts All Assets Out of Dollar to Buy Yuan

I´m not sure if the Chinese are happy with comments like this...... But there is little doubt that the Yuan is significantly undervalued. I recommend to visit Brad Setser´s Blog to read more about this topic. Lets be clear a rise of the Yuan will change the landscape for lots of regions and will have big implications for all asset classes for years to come. In the meantime the Chinese have to deal with lots of hot money that is chasing Chinese assets.

Ich kann mir vorstellen das die chinesischen Offiziellen solche Kommenate nicht gerne hören.... Aber es besteht kaum ein Zweifel das der Yuan deutlich unterbewertet ist. Mehr Expertise zu diesem Thema gibt es regelmäßig auf Brad Setser´s Blog. Ein schneller Anstieg dürfte zu einigen Verwerfungen führen und dürfte kaum eine Region oder Anlageklasse unbeeindruckt lassen. In der Zwischenzeit müssen die Chinesen damit leben das eine Menge "Hot Money" chinesche Vermögenswerte regelrecht jagt .

Jim Rogers Shifts Assets Out of Dollar to Buy Yuan Oct. 24 (Bloomberg) -- Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency.

``I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999. ``I'm that pessimistic about what's happening in the U.S.''

Rogers, delivering a presentation late yesterday at an investors' meeting organized by ABN Amro Markets in Amsterdam, said he expects the Chinese currency to quadruple in the next decade and that he is holding on to commodities such as platinum, gold, silver and palladium.

The dollar has dropped against all the 16 most actively traded currencies except the Mexican peso this year as slowing growth and the first interest-rate reduction since 2003 last month dimmed the allure of dollar-denominated assets.

Since the Fed lowered U.S. interest rates on Sept. 18, the first cut in four years, the dollar has fallen 2.8 percent against the euro and touched a record low yesterday. Gold rose to a 27-year high and platinum jumped to a record.

``It's the official policy of the central bank and the U.S. to debase the currency,'' said Rogers, a former partner of George Soros.

Reserve Currency
``The U.S. dollar is and has been the world's reserve currency, the world's medium of exchange,'' he said. ``That's in the process of changing. The pound sterling, which used to be the world's reserve currency, lost 80 percent of its value, top to bottom, as it went through the whole period of losing its status as the world's reserve currency.''

The Chinese currency, known as the renminbi, or yuan, is ``the best currency to buy right now,'' Rogers said. ``I don't see how one can really lose on the renminbi in the next decade or so. It's gotta go. It's gotta triple. It's gotta quadruple.''

> Here is short term outlook from Morgans Stanley on this topic Fasten the Seatbelt

> Hier ein aktueller Kommentar von Morgan Stanley zu diesem Thema Fasten the Seatbelt

China has followed a gradualist approach. In 2006, the renminbi appreciated against the US dollar by 3.4% but against the currency basket (i.e., the NEER) by only about 0.8%. As of last Friday, the cumulative appreciation against the US dollar so far this year was 4%, but against the currency basket only about 1.4%

Since I expect the pace of renminbi appreciation against the US dollar to accelerate markedly for the remainder of the year, I endorse our FX strategy team’s forecast that the USD/CNY rate will reach 7.30 by end-December (see FX Impulse, October 18, 2007). This year-end target implies about 2.7% appreciation of the renminbi against the US dollar for the remainder of the year and slightly less than 7% for 2007 as a whole.

Despite this seemingly aggressive USD/CNY forecast, I estimate – based on our FX strategy team’s forecasts of the exchange rates for China’s major trading partners – the cumulative appreciation of renminbi NEER for 2007 will be only about 3.9%

The yuan strengthened past 7.5 to the dollar today for the first since the central bank ended a fixed exchange rate in July 2005. The currency has gained 10.5 percent since the dollar link was abandoned.

China, growing faster than any other major economy, is ``going to be the most important country in the 21st century,'' he said. China's gross domestic product expanded 11.9 percent in the second quarter, and analysts surveyed by Bloomberg estimate the economy grew by 11.5 percent in the three months to Sept. 30.

> I recommend to read Is the credit squeeze a prelude to a China crash? from John Plender via the FT. I suggest to read the entire link.

> Hier ein weniger bullische Meinung von John Plender Is the credit squeeze a prelude to a China crash? via der FT. Ich empfehle den kompletten Link zu lesen.

The backcloth has invariably been a shift in global power whereby the growth of an immature creditor country wedded to protectionist trade policy has contributed to imbalances of savings and investment. Attempts to manage the currency volatility arising from imbalances have derailed monetary policy and created bubbles in asset markets, leading to crashes and financial distress.

Rogers also is buying Swiss francs and Japanese yen, which he said have been ``pounded down'' because of the so-called carry trades.

Unwinding Carry Trades
In the carry trade, investors borrow in countries with low interest rates, such as Japan, and invest the proceeds where rates are higher. Japan's benchmark overnight lending rate is 0.5 percent, compared with 6.5 percent in Australia and 8.25 percent in New Zealand.

The carry trades in yen and francs will ``unwind someday,'' which will send the currencies ``straight up,'' Rogers said. ``I'm buying the yen.''

The bull markets in bonds and stocks are ``over,'' he said. ``Bonds will be a terrible place to be for many years and will in fact be going down for many years.''

Rogers said he remains bullish on commodities because ``that's where the big fortunes are going to be made in the world in the next five, or 10 or 15 years. The current bull market is going to last until sometime between 2014 and 2022.''

Commodity Prices
Commodity prices have surged as demand for raw materials, especially from China, rose faster than producers were able to increase output. Agricultural prices have led recent gains, including a record high for wheat last month and a three-year high in soybeans.

``The number of hectares devoted to wheat farming has been declining for 30 years, the inventory levels of food are at the lowest level since 1972,'' Rogers said. ``Suppose we start having droughts again. God knows how high the price of agriculture is going to go, so that's where I'm putting more of my money now than in other things.''

He added, ``I think I'm going to make more money in agriculture than I make in precious metals.''

Platinum, gold, silver and palladium will ``be much, much higher during the course of the bull market,'' he said.

Fed Cartoon Special :-)

After Bernanke has "pulled a Greenspan" i think it is time for some Fed cartoons. And often enough there is a little bit of truth in there..... ;-)

If you want something rational about the Fed i suggest to read The Fed: Magical Fairies and Pixie Dust from Hussman or just watch this Chart from Minyanville.

On top of this the post Dollar = Confetti? comes to mind..... Please check the comments for other cartoons, quotes and links.

Nachdem Bernanke gestern nun den "Greenspan gemacht" hat kann es nicht schaden eine Kollektion in Sachen Fed Cartoons auszugraben. Und oft genug verbirgt sich ja in diesen Bildern zumindest ein Fünkchen Wahrheit.... ;-)

Wer es etwas rationeller liebt dem lege ich The Fed: Magical Fairies and Pixie Dust von Hussman bzw. diesen Chart von Minyanville ans Herz.

Keine Ahnung warum mir spontan zu dem Thema noch das Posting Dollar = Confetti? einfällt......... Für weitere Cartoons, Zitate und Links bitte in den Kommentaren stöbern

Thanks to Orangequant

Thanks to Wall Street Follies

Thanks to Cox & Forkum

The following one has nothing direct to do with the Fed but......

Der nachfolgende Cartoon hat zwar nichts direkt mit der Fed zu tun, aber......

Dollar = Confetti?

Dollar = Confetti? That´s the not so serious question Mike Larson is asking. With the US$ Index hitting new historic lows and a nasty US recession in the cards i wanted to bring up this cover from 2004. It looks like the Economist will have multiple years to reuse this image.....Here the US$ Index since 1971 / Chart that shows how significant the break of the 80 level was....

Dollar = Confetti? Das ist die provokante und nicht ganz ernst gemeinte Frage die sich Mike Larson stellt. Da der US$ Index nun täglich neue Tiefen erreicht und eine üble US Rezession unterwegs bzw. schon da ist kann ich mir nicht verkneifen dieses Cover aus dem Jahr 2004 zu posten. Es sieht ganz so aus als wenn der Economist das noch einige Jahre wiederverwenden kann...... Hier der US$ Index Chart seit 1971 der eindrucksvoll zeigt welche jahrentelenage Unterstützung in den letzten Tagen aus dem Markt genommen worden ist......

It is nice to see that Fundamentals Matter (In The End..) / Cartoons :-). And it doesn´t help when on top of this there is a massive capital flight from US investors out of the Greenback as shown here and here

Es ist beruhigend zu wissen das harte Fakten (Cartoons) am Ende doch zählen:-) Es ist auch nicht gerade hilfreich (aber wenig verwunderlich) wenn zusätzlich eine nie dagewesen Kapitalflucht aus dem Greenback von Seiten der US Investoren ( siehe hier und hier) einsetzt.

Oil Closes at Record High (At Least in Dollar Terms)

Keep this is mind when Wall Street is calling a weak $ great news. Too bad that joe sixpack has to pay the price.....Got gold.....?

Ich möchte momentan weniger denn je mit den Amis tauschen. Abseits von Wall Street findet wohl kaum einer den fallenden $ so prickelnd...... Kein Wunder das Gold steigt.

Thanks to Bespoke

Oil closed at a record high today even after news came out that OPEC would increase output. Part of the reason for oil's rise is based on the fact that it is priced in dollars which are falling. So even if global demand is unchanged, the falling dollar results in a higher price.

When priced in Euros, oil is still 8% off its record high of 60.91 set on April 21, 2006.

Disclosure: long Suncor, gold, goldmines (HUI), NAK

Oil Inflation Adjusted / Chart Of The Day

On top of this i recommend Can the Fed control prices? from Mish

Passend zum Thema empfehle ich den o.g. Link von Mish

The price of crude oil is rising once again. Today’s chart provides some perspective to the latest price spike with a long-term view of West Texas Intermediate Crude.

One point of interest is that oil is trading near 25-year highs but still well below the inflation-adjusted highs of 1980. It is also interesting to note that most oil price spikes were a result of Middle East crises and often preceded or coincided with a US recession.

Peter Schiff On CNBC

With the $ just around the multi decade bottom at 80 it is especially funny to hear Schiff vs the guy from CNBC. Click on the headline to start the video


Da sich der $ heute anschickt den jahrzehntelang gehaltenen Boden bei 80 zu durchbrechen ist es ein besonderer Genuß Schiff und den ziemlich typisch amerikanischen "Sprecher" von CNBC zu hören. Klickt auf die Überschrift um das Video zu starten.

$ index right now at 80,09......

US $ vs. Major Currencies

Thank God that the US is committed to their strong their "strong $ policy"........

Gott sei Dank sind die USA ja Ihrer legendären Politik des starken $ verpflichtet.....
> The charts don´t include yesterday´s brutal sell off.....

> Charts sind vom 09. July und beinhalten nicht den gestrigen Ausverkauf

got Gold ....... ?