Economic Warfare

[Drifterwood]

I have noticed over the last month or so, that when the US markets open, the £ comes under attack from the $.

Is the US manipulating the currency markets? or is there a genuine reason for this process?

This is a completely straight question.

 

[tripod]

Yes, you are right to perceive this... nothin' gets by you!

 

[Drifterwood]

Thanks TP. Seems a bit of a double edged sword to me.

I do wonder if economics is just a big game with deadly outcomes.

 

[B_starinvestor]

I have noticed over the last month or so, that when the US markets open, the £ comes under attack from the $.

Is the US manipulating the currency markets? or is there a genuine reason for this process?

This is a completely straight question.

The U.S. cannot manipulate the value of its currency. The demand for U.S. currency is set by market forces, not GWB or the Fed. Historically, the U.S. dollar is the most sought-after form of currency internationally. We are a strong debtor.

 

[B_VinylBoy]

The U.S. cannot manipulate the value of its currency. The demand for U.S. currency is set by market forces, not GWB or the Fed. Historically, the U.S. dollar is the most sought-after form of currency internationally.

Spoken like a person who doesn't travel often.
The value of our dollar has dropped dramatically over these last 8 years. You can travel to small countries like Jordan & Israel, and their dollars are considerably stronger. While it's true that our dollar still remains strong against some currencies out there like Brazil and even Australia, most places have manage to strengthen or even surpass ours. Just ask Canada, our neighbor to the north, who now have a dollar that is stronger than ours for the first time in many decades. The first time I went to Canada in 2000, a Canadian dollar was roughly equal to 70 cents of our own currency. Now it's above by more than a dime. A 40 cent climb in 8 years!

Use this and see for yourself. $100 American dollars doesn't get nearly as much as it used to. XE - The World's Favorite Currency and Foreign Exchange Site

 

[tripod]

I wonder if Drifterwood can illustrate what he means by "attacks", I know what he is talking about but feel at a loss to explain it coherently.

 

[marleyisalegend]

Is the US manipulating the currency markets? or is there a genuine reason for this process?

Mostly what they do is indirect but it always has a trickle down effect. We like trickle down effects here in the US of A.

The U.S. cannot manipulate the value of its currency.

I don't know whether to laugh at you or pray for you. Just when I think your ignorance has hit the ceiling....

 

[uniqueusername]

The U.S. cannot manipulate the value of its currency. The demand for U.S. currency is set by market forces, not GWB or the Fed. Historically, the U.S. dollar is the most sought-after form of currency internationally. We are a strong debtor.

I hate to disagree with you (because I normally don't), but we can manipulate the value of our currency. All we have to do is print off more money.

 

[marleyisalegend]

^There are plenty of other things we do that directly (and indirectly) affect the value of our dollar. The last century has proven that.

 

[Drifterwood]

I wonder if Drifterwood can illustrate what he means by "attacks", I know what he is talking about but feel at a loss to explain it coherently.

Currency markets and speculation is not my area though the exchange rate is significant to what I do. So by attack, I mean an organised strategy and action to weaken the £ against the $. The rate can be strengthening in favour of the £ and when the US markets open, the trend reverses.

I don't know the means, presumably selling short options which become self fulfilling etc, I don't know, but the reasons are fairly self explanatory.

I find economics bizarre, you can have exactly the same argument for supporting opposing outcomes.

 

[TurkeyWithaSunburn]

Is this similar to the attack George Soros (?) did and caused the UK to pull out of the Euro basket of currencies years ago?

Isn't it interesting that some of the hedge funds have been going near belly up and the price of oil is now down by about 40% from it's high?

I'd be more likely to suspect the Sovereign Wealth Funds and hedge funds manipulating things, than the US treasury/FedReserve.

 

[curious n str8]

^There are plenty of other things we do that directly (and indirectly) affect the value of our dollar. The last century has proven that.

OK Marley do you really know how bad our economy really is? Do you even care? For the sake of my next question lets say the Republicans caused everything,How would you fix the economy?

 

[midlifebear]

I wonder if Drifterwood can illustrate what he means by "attacks", I know what he is talking about but feel at a loss to explain it coherently.

I feel the same way. I even done did get me one of them thar secondary majors in ecomonics (way more impractical than an MBA) when I was an undergrad in the 1970's. But so much has changed since the the days of Michael Milken and the invention of junk bonds that it's difficult to follow and understand the exotic monetary instruments concocted since the rise of Reagan's "trickle down" theory of slave ownership and government deregulation.

However, it is currently true that the USA has borrowed and continues to borrow money that it does not have to purchase oil. The last 7 years are widely recognized as a time when the greatest amount of world wealth has passed from one economy to the rest of the world during the entire history of economics; the wealth of the USA to foreign lands. It certainly cannot last much longer. It would be interesting to hear (from someone with a brain and who knows about such things) how closely integrated the USA and the UK economies are integrated.

As for Canada's Loony (there may be an e between the n and the y), although it has exceeded parity with the US Dollar, the US Dollar only buys approximately 70 cents worth of goods and services compared to what it did five years ago. Therefore, Canadians have gained some and then lost it to inflation. Based on that fact, figure in the inflation guestimate what the US Dollar has lost in actual value. The US Dollar, despite what one particular poster believes, is no longer the currency 'Mericuhns like to remember it as being. Argentina, where I live half the year, is seriously looking into formally attaching the Argentine Peso to the Euro. Currently it is pegged to the US Dollar. More and more Euros show up in the streets and are eagerly accepted as a secondary currency for big ticket cash purchases in lieu of the US Dollar. Still, even if Argentina does peg their Peso to the Euro, the exchange rate will remain the same -- 4.75 to 5.75 Pesos to the Euro (depending upon the variable exchange rate). Whereas one All Mighty US dollar continues to fetch about 3.10 Pesos give or take one or two centavos.

There is also something happening among the MERCOSUR countries in South America (Brazil, Uruguay, Argentina, Paraguay) where the leaders of those countries are managing their economies in such a way as to no longer be dependent upon North America or Europe as trade partners. They are actually eliminating WMF debt by paying it off and not taking on any development loans from foreign governments except within their own tight circle as trading partners. They are primarily export economies and import very little. Their growth is astonishing, especially when one considers that Argentina's economy completely collapsed in 2001, wiping out the entire middle class in three days. Now all four economies are struggling with serious inflation as they continue to produce and export more goods and services to China, Australia, Singapore, etc. than they ever have in the past.

 

[Nrets]

What would be a good currency to have right now? The pound and the dollar keep attacking each other?
That is funny cause I was just thinking of trying to trade as much money for pounds as possible. I guess what I am really after is which currency is doing the best relative to the US dollar?

 

[rawbone8]

What would be a good currency to have right now? The pound and the dollar keep attacking each other?
That is funny cause I was just thinking of trying to trade as much money for pounds as possible. I guess what I am really after is which currency is doing the best relative to the US dollar?

Gold ducats and Smith & Wesson lead.

 

[faceking]

I have noticed over the last month or so, that when the US markets open, the £ comes under attack from the $.

Is the US manipulating the currency markets? or is there a genuine reason for this process?

This is a completely straight question.

(cracks knuckles, pulls up chair)

At one point of my career, I was in Foreign Exchange Capital Markets,... circa the fall of the Thai Bhat (the greatest ripple effect across economies, ever... bigger than this current sitch) up thru the installation of the Euro. [enough credentials FaceSlob]

Once again, starinvestor proves why he's Top 5 LPSGer on finance and economics. The government can in a longer-term fashion impact currency , but usually more often than not, doesn't work out.

There is a lot going on to your honest perception. For one, the pound was were the dollar was a few years ago. Overvalued, lifted by the economy (incl real estate), and a number of other factors. This is the daily result of an overall recoil.

Look at the GBP/JPY on a daily basis. - pound to the Japanese Yen...

These are just intra-day forces at work. The US currency forces are at will at this point. There's more concern on M1, M2, and the yield curve on the risk-free rate.

Hell, look at the Dow the past 4 days. http://finance.yahoo.com/echarts?s=^DJI#chart1:symbol=^dji;range=5d;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

A quick opening spike (likely the minimal impact of shorts covering their positions), and then thump... you can time it like nobody's business.

Overall though... what you are seeing in coincidental to the natural market behavior.

Nothing to see here, move along ;-)

BTW: NEVER as an individual investor play the F/X market... it's really not meant for speculation. The vehicles in play for F/X are meant to hedge... hedging VERY large positions (for example, McDonalds is a legitimate player to hedge against exposure against volatile currencies in their foreign investments (in the billions and billions).

all those fly-by-night FX websites are bad news.

 

[B_starinvestor]

Spoken like a person who doesn't travel often.
The value of our dollar has dropped dramatically over these last 8 years. You can travel to small countries like Jordan & Israel, and their dollars are considerably stronger. While it's true that our dollar still remains strong against some currencies out there like Brazil and even Australia, most places have manage to strengthen or even surpass ours. Just ask Canada, our neighbor to the north, who now have a dollar that is stronger than ours for the first time in many decades. The first time I went to Canada in 2000, a Canadian dollar was roughly equal to 70 cents of our own currency. Now it's above by more than a dime. A 40 cent climb in 8 years!

Use this and see for yourself. $100 American dollars doesn't get nearly as much as it used to. XE - The World's Favorite Currency and Foreign Exchange Site

Right. Our dollar sucks right now. Our government and economic infrastructure does not benefit from a weak dollar. I'm not here to argue with anybody on this, but we do not want a weak dollar - imports are great but at the end of the day, we still are losing net net. We have influence and some push on our currency, but the worldwide demand for our dollar sets the price, not us; not our Fed.

 

[B_starinvestor]

I hate to disagree with you (because I normally don't), but we can manipulate the value of our currency. All we have to do is print off more money.

And that is not helping our currency. Sure we can 'devalue', but I wouldn't call that 'manipulating our currency.'

 

[anon9999978]

I hate to say it but I agree with starinvestor here. These are just market forces. The reason why it may appear that the Pound and the $ "attack each other" first thing in the morning (and I confess I have not researched whether or not this is the case - I'm just taking the original poster's observation at face value) is because US companies that might have been holding Pounds as an investment, a hedge, or otherwise, need dollars. Why? Because they can't pay American workers or US counterparties in pounds. (What would you say if you couldn't spend your paycheck in America because it was denominated in Pounds? LOL) In normal times if these companies needed dollars to make payroll or pay for their inputs or whatever they would just get a loan or draw on their revolver. But nowadays the banks won't lend because of the credit crunch. So companies sell what they can to get dollars. And they don't want to sell hard assets like real property to raise cash, so they sell Pounds instead. that makes the value of the Pound go down and the value of the dollar go up. That's it. No big consipracy.

 

[B_starinvestor]

Spoken like a person who doesn't travel often.
The value of our dollar has dropped dramatically over these last 8 years. You can travel to small countries like Jordan & Israel, and their dollars are considerably stronger. While it's true that our dollar still remains strong against some currencies out there like Brazil and even Australia, most places have manage to strengthen or even surpass ours. Just ask Canada, our neighbor to the north, who now have a dollar that is stronger than ours for the first time in many decades. The first time I went to Canada in 2000, a Canadian dollar was roughly equal to 70 cents of our own currency. Now it's above by more than a dime. A 40 cent climb in 8 years!

Use this and see for yourself. $100 American dollars doesn't get nearly as much as it used to. XE - The World's Favorite Currency and Foreign Exchange Site

Agreed. Our dollar has been sinking for years. But we didn't 'manipulate it' into sinking.