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Mad Rush to "Dump the Dollar" Begins

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He threatened to do it all last year, and he finally made good on his promise.

Ben Bernanke sent our little greenback plunging to its demise.

The dollar dropped to record lows through the $1.40 level against the euro on Thursday as the US currency continued its slide following the Federal Reserve’s decision to cut interest rates earlier in the week.

“The key $1.40 level has been breached and dollar weakness is evident across all currency pairs reflecting the prospect of a move in interest rate differentials against the currency,” said Derek Halpenny at Bank of Tokyo-Mitsubishi.

In other words, the mad rush to other currencies and away from the dollar begins!

The euro’s rise through the psychologically important $1.40 barrier - seen as pain barrier for eurozone exporters - triggered a flurry stop-loss buying, sending the single European currency higher across the board.

The euro rose 0.5 per cent to $1.4035 against the dollar and by 0.4 per cent to £0.7006 against the pound – its highest level since January 2005. It gained 0.2 per cent to Y162.20 against the yen.

Meanwhile the dollar fell 0.2 per cent to $2.0050 against the pound, 0.4 per cent against the yen to Y115.55 and 0.6 per cent to a fresh 30-year low of C$1.0090 against the Canadian dollar. It also lost 0.9 per cent to SFr1.1739 against the Swiss franc.

David Woo at Barclays Capital said as the US economy slowed down, it would become more difficult for the US to attract financing for its current account deficit.

“This increases the risk of a disorderly adjustment of global imbalances in which the dollar is likely to perform very poorly,” he said. “With euro/dollar now having broken above $1.40, the market is likely to price in this risk through higher volatility.”

Analysts said the move in euro/dollar through $1.40 would also prompt a rise in political comment on currency issues.

“With the dollar moving to some sensitive levels, currency politics are likely to return to the agenda in the last quarter of this year,” said Simon Derrick at Bank of New York Mellon.

He said that after recent comment from Nicholas Sarkozy, the French president, it would not be surprising to hear more comments from within the eurozone on the impact of the strong euro on the region’s exporters.

Meanwhile, he said tensions between the US and China were also set to rise ahead of the launch of the country’s sovereign wealth fund, which is intended to maximise returns on $200bn of China’s $1,330bn dollar stockpiles.

Analysts said the launch of the fund might speed up the diversification of China’s reserves away from the dollar, piling more pressure on the currency.

“With $200bn to play with, there will be heightened speculation on what they will spend their money on,” said Mr Derrick.

Hans Redeker at BNP Paribas said Saudi Arabia, which is also sitting on significant dollar stockpiles, was also going to be in the spotlight since it did not follow the Fed in cutting interest rates, even though the Saudi riyal is pegged to the dollar.

He said it was understandable that Saudi Arabia was not following the Fed’s lead, given the rising inflationary pressure within its overheating and oil price supported economy, but the country would have to tighten fiscal conditions - which was unlikely to happen.

“The currency peg will come under increasing pressure the more economic fundamentals of the region diverge from the recessionary US environment,” he said.

In other words, GAME OVER! - the dollar's going down.

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    Submitted by qrswave on Thu, 2007-09-20 17:42

    Canadian dollar

    As of Friday, 22 September 07, the Canadian dollar is worth more than the American dollar.

    thx1138 | Sat, 2007-09-22 09:05
    Not good for Canada

    Certainly not.

    US folks won't come over to buy Canadian. They are spoiled by the way their dollar used to go far.

    And Canadians.....well they aren't shopping much at all. Too much job loss. Still, many will go across the border to buy US goods. They will take advantage of their equalized dollar like they always have.

    And this will hurt Canada even more. Right now the economy is much worse than '80-'82 and '91-'93.

    I might be a bit off with the time frame, but pretty close all the same.

    Rhiannon | Sat, 2007-09-22 07:53
    IRAs

    move it into gold or silver or even better - something that is actually PRODUCTIVE - like solar energy panels for your home.

    these things will not lose value whereas your IRA will.

    ---------------------------------------
    "Money" has no value - people do.

    qrswave | Fri, 2007-09-21 21:30
    right, qrs.

    ..remember, it's all by design[ed] obsolecense, even though inevitable, it was obviously planned for; the artificial causing of a great depression..
    ..will pick up a geiger counter, masher.. among a few other things.. that's a scary cumulonukus!!
    ..raining ashes? i pray it won't.

    Grim Reaper | Fri, 2007-09-21 08:08
    Me? I hear..

    a WONDERFUL Thunder building at America's door. Once the cash to avert collapse runs out THEN the ones with medical supplies and fresh water and food stocks will have good reason for there prudent stocking of there larders.

    This IS going to get REAL messy folks.

    A meter to save your life...After...

    The Real Shit goes into the fan.

    First you take D.C. Then you take New York (:

    Masher1 | Fri, 2007-09-21 06:33
    Claymoremind

    Excellent observation (as always).

    Yes, as of right now, the Canadian dollar is exchanging at 99.7 cents U.S.

    My mother is Canadian. When I mentioned this to her, she thought it was big news.

    Economists will try to spin this into a lesser impact. They’ll claim that exchange rates do not express the "true value" of the dollar. They'll say it's a "temporary phenomenon" brought on by the Fed's cut in interest rates, and so forth.

    I say overall exchange rates reveal a true picture of economic health.

    The New Zealand dollar is already worth more than the US dollar ($1.16)

    The Australian dollar (89 cents U.S.) is rapidly gaining.

    thx1138 | Fri, 2007-09-21 05:52
    Dollar at parity with Canadian Dollar

    Tomorrow, or at least next week, the U.S. dollar will be worth less than the Canadian dollar. That is going to be a huge WAKE UP point for millions of the Sheeple and there will have to be a big disraction to compensate.

    Claymoremind | Fri, 2007-09-21 04:00
    ben the scapegoat bernanke

    of course ben is just a bus boy following orders from the world's central bankers.

    it's all an act.

    Ben "pulls" the fake lever in public - and gets dismembered afterwards by an angry mob - while the central bankers behind the scenes execute what appears to be a spontaneous collapse but is in fact a controlled demolition.

    ---------------------------------------
    "Money" has no value - people do.

    qrswave | Thu, 2007-09-20 21:49
    What's That I Hear?!?!?

    Can you hear it?!?! The calm before the storm, or is that a big sucking sound I hear(like the one made when a dentist cleans your teeth). America the decline. In all our greed, and waste, and excess we have finally done it to ourselves. Ruined America from the inside out, like a dog eating its own leg. Every consumer for himself!!! We have NO ONE to BLAME but OURSELVES... Did we think that the earth had unlimited resources? Did we think that the world was truly our oyster alone and all the other nations subserviant? Boy the government sure did sell many of us a rotten bill of goods. Now back to American Idol.

    mychael | Thu, 2007-09-20 19:18