Dollar advances as investors seek safe havens

[GoFlyKiteNow]

NEW YORK: The dollar continued to climb on Wednesday as investors moved more assets into the safety of the American currency after consumers trimmed borrowing in May for the fourth straight month and the International Monetary Fund gave a mixed outlook on the economy.

In late New York trading on Wednesday, the 16-nation euro fell to $1.3851 from $1.3927 late Tuesday, while the British pound dropped to $1.6027 from $1.6153.

The dollar slid to 92.45 Japanese yen from 94.81 yen. The IMF increased its estimate for global economic growth in 2010 to 2.5 per cent, from an April projection of 1.9 per cent. At the same time, it slightly downgraded its forecast for this year to a contraction of 1.4 per cent, from 1.3 per cent.

The Federal Reserve, meanwhile, said the consumer credit fell at an annual rate of 1.5 per cent, or by $3.2 billion, from April. Economists expected a deeper cut of $9.5 billion.

Falling commodity prices added to the recent spate of gloom Wednesday.

Over the past year, the greenback has tended to benefit whenever investors feel spooked, pulling their money out of stocks and redirecting funds to super-safe government debt.

``Dollar dominance continues as the mood darkens in financial markets,'' James Hughes, a currency analyst at CMC Markets said. ``There are ongoing concerns as to the economic outlook, investors are jittery and as a result the safe haven plays are growing in popularity.''

Also Wednesday, official figures confirmed that the 16 countries that use the euro saw output shrink by 2.5 per cent in the first quarter of 2009 from the previous three month period.

 

[longbow]

No doubt about that. US is the world largest economy and consumer and US is world military superpower.

But I am sure you too can see cracks are forming in this strength. When the US$ strengthens because of what head Chinese Central Bank says. When there is all this talk about losing reserve $ status. When Geitner and Hilliary made a bee line to Beijing after the elections and talk about economy and yes $ as reserve currency (not a peep about democracy or human rights).

Most importantly, we are witnessing the dramatic weakening of the US financial system and the high levels of consumer as well as Government debt. When the Treasury auction of 10 year debt becomes closely watched because of fear that the Chinese might stop buy.

These are all signs of weakness. Chinese have made a shot across the bow and you can be sure that although it is impolite to talk about US losing its reserve status, everyone is thinking about it. Should the US economy stagnates and the Chinese GDP continue to grow, China will demand more rice, more copper, for oil more resource.

Even luxury consumer goods - 10% of new Rolls Royces are sold in China (25% of that in HK) in 2008, they expect China to be world's 2nd largest market in 2009 (they were 3rd in 08).

There are 5 exclusive Louis Vuitton Maison in the world and 2 of them are in HK!! (you can be sure Shanghai is going to have one soon).

Here check out this LV site listing their stores in China. Surprise surprise they even have one in Urumqi, China!! So much for counterfeit LV bags, LV themselves are seeing the gold and making a mad rush for the Chinese market. I looked under China and then select the cities and I was shocked at the number of cities with LV stores.

Just as the Big mac index is used to compare cost of living, you can pretty much use the LV index to see the potential wealth and demand for uber luxury goods. Go check out the other countries and see how many LV shops they have. LV is a hard nose, free market retailer and they are very careful where they situate their shops less it cheapens their image.

Cartier has 16 company owned shops in China - look under jewellery because Cartier sells jewellery under their own Cartier shops ! Watches can be sold by outside retailers. http://www.cartier.com/

http://www.louisvuitton.com/web/fla...UPU?buy=0&langue=en_GB&direct1=home_entry_gb0

NEW YORK: The dollar continued to climb on Wednesday as investors moved more assets into the safety of the American currency after consumers trimmed borrowing in May for the fourth straight month and the International Monetary Fund gave a mixed outlook on the economy.

In late New York trading on Wednesday, the 16-nation euro fell to $1.3851 from $1.3927 late Tuesday, while the British pound dropped to $1.6027 from $1.6153.

The dollar slid to 92.45 Japanese yen from 94.81 yen. The IMF increased its estimate for global economic growth in 2010 to 2.5 per cent, from an April projection of 1.9 per cent. At the same time, it slightly downgraded its forecast for this year to a contraction of 1.4 per cent, from 1.3 per cent.

The Federal Reserve, meanwhile, said the consumer credit fell at an annual rate of 1.5 per cent, or by $3.2 billion, from April. Economists expected a deeper cut of $9.5 billion.

Falling commodity prices added to the recent spate of gloom Wednesday.

Over the past year, the greenback has tended to benefit whenever investors feel spooked, pulling their money out of stocks and redirecting funds to super-safe government debt.

``Dollar dominance continues as the mood darkens in financial markets,'' James Hughes, a currency analyst at CMC Markets said. ``There are ongoing concerns as to the economic outlook, investors are jittery and as a result the safe haven plays are growing in popularity.''

Also Wednesday, official figures confirmed that the 16 countries that use the euro saw output shrink by 2.5 per cent in the first quarter of 2009 from the previous three month period.

 

[GoFlyKiteNow]

No doubt about that. US is the world largest economy and consumer and US is world military superpower.

But I am sure you too can see cracks are forming in this strength. When the US$ strengthens because of what head Chinese Central Bank says. When there is all this talk about losing reserve $ status. When Geitner and Hilliary made a bee line to Beijing after the elections and talk about economy and yes $ as reserve currency (not a peep about democracy or human rights).

Most importantly, we are witnessing the dramatic weakening of the US financial system and the high levels of consumer as well as Government debt. When the Treasury auction of 10 year debt becomes closely watched because of fear that the Chinese might stop buy.

These are all signs of weakness. Chinese have made a shot across the bow and you can be sure that although it is impolite to talk about US losing its reserve status, everyone is thinking about it. Should the US economy stagnates and the Chinese GDP continue to grow, China will demand more rice, more copper, for oil more resource.

Even luxury consumer goods - 10% of new Rolls Royces are sold in China (25% of that in HK) in 2008, they expect China to be world's 2nd largest market in 2009 (they were 3rd in 08).

There are 5 exclusive Louis Vuitton Maison in the world and 2 of them are in HK!! (you can be sure Shanghai is going to have one soon).

Here check out this LV site listing their stores in China. Surprise surprise they even have one in Urumqi, China!! So much for counterfeit LV bags, LV themselves are seeing the gold and making a mad rush for the Chinese market. I looked under China and then select the cities and I was shocked at the number of cities with LV stores.

Just as the Big mac index is used to compare cost of living, you can pretty much use the LV index to see the potential wealth and demand for uber luxury goods. Go check out the other countries and see how many LV shops they have. LV is a hard nose, free market retailer and they are very careful where they situate their shops less it cheapens their image.

Cartier has 16 company owned shops in China - look under jewellery because Cartier sells jewellery under their own Cartier shops ! Watches can be sold by outside retailers. http://www.cartier.com/

http://www.louisvuitton.com/web/fla...UPU?buy=0&langue=en_GB&direct1=home_entry_gb0

Once again, I notice, that you have focused on economic statistics as the pointer to a country's currency power. It is not. The spinal cord of the dollar is the 'software' of USA, that I mentioned in another post.

Now about China's economic growth. It is an export driven economy hugely dependent on the US consumer market, which in turn was dependent on easy credit available at that time ( pre-crisis era). When this US consumer disappeared, the after effect could be seen. The China economy shrunk dramatically. One knew it would happen. It was so logical.

Today, we see over 100,000 factories shut down in China..all of them were once making goods for export to western nations. A country that has no proper 'software' will find it hard to substantiate or sustain confidence in its economic prosperity, no matter how many Rolls Royce and Prada watches it sells internally. Confidence..that is the long term key word in economics. Not GDP

End of the day -- MONEY GOES WHERE IT IS COMFORTABLE AND SECURE.