What Dubya's sound fiscal policy has wrought

US setbacks see dollar plunge to 15-year low

Ambrose Evans-Pritchard, 12/1/2006, UK Telegraph

The dollar tumbled to a near 15-year low against sterling yesterday on fresh signs of economic trouble in the United States.

An 8.3pc crash in US industrial orders and an admission by the Federal Reserve chairman that Washington does not know how bad housing really is set off another day of wild gyrations on the currency markets.

Dollar woes poised to carry over into next year

Greenback is down about 50% vs. euro in past five years; down 6% vs. yen

By Wanfeng Zhou, MarketWatch

Last Update: 6:48 PM ET Nov 29, 2006

NEW YORK (MarketWatch) -- After a precipitous slide in the last week that caught many traders off guard, the dollar is vulnerable to further losses and may continue to weaken against major rivals heading into 2007, analysts said Tuesday.

"Sentiment for the dollar has been deteriorating steadily over recent weeks," said Mitul Kotecha, head of global foreign-exchange strategy at French investment bank Calyon. The decline was not prompted by a particular piece of news or data release, "but rather a general worsening in sentiment that saw long held technical levels breached," he said.

"We expect the dollar to weaken further into year end, and retain this tone in the early months of 2007," he said.

Death Knell of the US Dollar

by Clive Maund, GoldWatch

"The conditions leading to an inevitable dollar panic sell-off did not come about overnight. They are the result of years of abuse, principally by the Federal Reserve of the US, which has created a veritable blizzard of dollars, and the universal acceptance of this “funny money” has, up until now, allowed the United States to freeload economically on the rest of the world, living way beyond its means. The exponential growth in dollars has been and is created electronically at the touch of a button, so that paying for anything is never a problem, whatever you want you simply print the extra money to pay for. Because foreigners have so far played along with this game, they are now widely, and to some extent understandably, regarded as stupid. However, it is a dangerous mistake to underestimate the mental capacities of other peoples. The Chinese, in particular, have an ancient and deep culture, and when it comes to strategic considerations, can outthink - and outflank virtually anyone."

US dollar 'will keep falling'

by Heather Stewart, Sunday November 26, 2006, The Observer

"The US dollar has reached a 'tipping point' as foreign exchange markets wake up to the threat that the Federal Reserve will have to slash interest rates in the new year to stave off recession, analysts say. After a sharp sell-off on Friday took the greenback to 18-month lows against the euro, and pushed the pound to $1.93, economists warned that there was worse to come for the US currency.

"'We are just at the start of what we think will be a downtrend for the dollar - a tipping-point has probably been reached,' said Tim Fox, currency strategist at Dresdner Kleinwort Wasserstein, who expects sterling to hit $2 within the next three months."