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marcosolo, 7. März 2004 18:37:32 MEZ
Factoids?* This will blow your mind.
marcosolo, 6. Dezember 2003 17:52:19 MEZ
Soros 'speculating against dollar'
The pound surged against the dollar yesterday amid speculation that Warren Buffett and George Soros, the world's most famous speculators, are betting the US currency will plummet.
Sterling powered to a five-year high against the dollar for a second day as concerns over the US current account deficit continued to outweigh evidence of a rebounding economy.
Traders believe selling the dollar is a one-way bet, and some latched on to rumours that speculators were building "short" positions on the dollar - betting it will tumble in the coming months.
One hedge fund manager, who asked not to be named, said: "I have heard that both Soros and Buffett are shorting the dollar. There's a growing belief on Wall Street that the dollar is looking like a one-way bet downwards."
A spokesman for Mr Soros, who famously "broke" the Bank of England when the pound crashed out of the exchange rate mechanism a decade ago, said he never commented on speculation. Mr Buffett was unavailable for comment.
The surge in the pound to $1.7155, its strongest level since October 1998, was boosted after Merrill Lynch forecast the dollar would plunge a further 8 per cent by the end of next year.
Demand for the dollar has waned on concern the country will not attract enough capital to fund its record current account deficit, which is expected to break through 5 per cent of GDP this year.
In a massive revision to its forecast issued on the eve of yesterday's Thanksgiving holiday, Merrill Lynch said the pound would hit $1.85 - which would be its highest level since 1992.
The blue chip Wall Street bank said sterling would rise on signs of returning economic strength, rising interest rates and hope that the Government won't raise taxes before a 2005 election. But it warned that the surge in the pound would be short-lived as the concerns overhanging the UK - from a budget deficit, huge consumer indebtedness and a tight labour market - would come home to roost.
"Bubble trouble currencies such as the pound should continue to do well for now," it said. "But upsides in the currencies in these regions should end next year as tighter conditions threaten to burst credit bubbles and shape market expectations of lower rates."
Merrill Lynch expects the dollar to tumble to $1.33 against the euro, a drop of 12 per cent from yesterday's $1.19 value. But it cut its forecast for the euro to surge to 80p against the pound - a level that would smooth sterling's entry into the single currency - to 73p.
A surge in the pound against the dollar will be a boon for British tourists but could cause headaches for both businesses and the Bank of England.
Khuram Chaudhry, a strategist at Merrill Lynch, said: "UK investors may find company sales exposure to the US unfavourable in this scenario.A stronger domestic currency is likely to mean the Bank is less likely to raise interest rates aggressively." David Bloom, a global economist at HSBC who does not see the pound going much above $1.70, said any spike in the pound would be short-lived. "If you want to sell the dollar because you believe in the structural problems such as the current account deficit then you buy the pound but there's a downside because the UK is also looking a trade deficit, an indebted economy," he said.
"If you think those factors will cause the dollar to fall then the pound should fall as well."
He said the main beneficiary should be the euro, which has smaller deficits - despite the high-profile row over the stability and growth pact. He said HSBC was sticking with its historic forecast for a dollar-euro rate of $1.35.
Mr Bloom warned that if the pound were to fall it could tumble even further than the dollar as there would be little interest from other countries to prop it up.
marcosolo, 29. November 2003 19:19:21 MEZ
wake up even the IMF warns trade gap could bring down dollar
Charlotte Denny and Larry Elliott
The International Monetary Fund yesterday warned that the colossal United States trade deficit was a noose around the neck of the economy, emphasising
The IMF's chief economist Kenneth Rogoff said that it was just a matter of time before the gap closed, tipping the dollar into a potentially steep fall.
"If we were looking at a poor developing country, the world gives them just enough rope to hang themselves. A country like the United States, they give them enough rope to tie the noose around their neck several times. But it does happen in the end," he said.
In its twice yearly report on the world economy, the Fund warns that even a controlled slide in the dollar's value is likely to slow US growth and unless other countries picked up the slack, the global economy would suffer.
Mr Rogoff said the collapse of world trade talks last weekend in Cancun could spell disaster for a global economy already too dependent on unbalanced growth in the US. Describing the breakdown as a "tragedy", he said global poverty would rise if protectionism took root in the world's biggest economies.
Wars in Iraq and Afghanistan and heightened geopolitical tensions worldwide after the September 11 attacks on the US would "unquestionably" hold back growth in the decades ahead, Mr Rogoff told reporters.
The report was highly critical of Europe's stagnating economies, blaming governments for failing to embrace deep structural reforms of their labour markets and welfare states.
"Reforms to improve the competitiveness of European labour and product markets could yield significant dividends in terms of regional output," the report said.
It also warned that an overrigid application of Europe's fiscal rulebook could push the eurozone deeper into trouble.
Chancellor Gordon Brown echoed the IMF's criticisms of the eurozone in an article in yesterday's Wall Street Journal, arguing that the credibility of Europe was at stake.
Demanding wide-ranging change to policies "that have held back our continent for too long", Mr Brown added: "Reform is not just desirable, it is an urgent necessity."
The chancellor said: "Having created a single market in theory, we should make it work in reality - and help it spread competition, cut prices, increase consumer choice and deliver higher productivity."
The impact of the stalled trade talks in Mexico on the fragile global recovery will dominate this weekend's annual meeting of the IMF and the World Bank in Dubai.
Mervyn King, the governor of the Bank of England, said yesterday: "The failure of the talks in Cancun will cast something of a cloud over the meeting.
"That is not a happy background in which to assess the durability of the recovery."
Misalignments between the world's biggest currencies are also likely to feature on the agenda, with the US hoping other countries will support its campaign to get China to strengthen its currency, the yuan.
Following an upgrading of its growth prospects by the fund, the US is expected to expand by 2.6% this year, the fastest of the big seven economies.
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