More Dollar Woes


Think the selloff in the US dollar is over? Think again:

Wsj_asia_domino11222004193406_2"Asia appears to be in the early stages of a regionwide currency revaluation, partly in anticipation that China will let its own currency float higher sometime in the next year.

From Tokyo to Seoul to Singapore, some investors are buying up large volumes of Asian currencies, a strategy that assumes Asian countries will tolerate somewhat stronger currencies in the year ahead. The South Korean won is trading near its highest level against the dollar in seven years, while the Japanese yen is up nearly 7% since the beginning of October.

Investors also are pouring capital into Asia’s equity and bond markets — a bet that appreciating currencies will boost the value of their assets over time. Meanwhile, a number of Asia’s largest companies are drafting strategies to deal with current and anticipated adjustments in Asian currencies, including cutting costs and changing the amount of business they do in dollars."

We are only in the 5th inning or so of this major, global shift — the reverberations of which will be felt for years. (That Alan Greenspan seems to have only  recently discovered this isn’t of consequence).

While the immediate impact on US multi-nationals will be a short term positive, consider the effects of Asian investors finding U.S. fixed income and equities too expensive — due to currency concerns.

I suspect this will end rather badly . . . 

Asia Bets on Stronger Currencies
PATRICK BARTA in Bangkok, Thailand, and ANDREW BROWNE and MARY KISSEL in Hong Kong
THE WALL STREET JOURNAL, November 23, 2004; Page A2,,SB110106445465680132,00.html

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  1. David Bennett commented on Nov 23

    Well doing my NRO watch to see how the right reacts.


    A Mr. Tamny argues it would be a very poor idea to float the Yuan especially because many experts believe it wouldn’t stand a chance before the dollar. We don’t want the Yuan to crash.

    Moving onward Mr. Bowyer argues that if we want to strengthen the dollar the solution is simple.

    I’ll give you 3 guesses.

    That’s right! Tax cuts.

    He has a point. The NYT suggested the dollar was falling because of the federal deficit and we all know if you read it in the NYT it has to be wrong, unless you agree with it of course, then it becomes an unarguable proof of whatever you’re saying.

    I personally think tax cuts are a bad idea however, I don’t think we want to destroy the poor yuan.

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