Dollar Falls to 2009 Low

Bloomberg reports that dollar falls to 2009 low as economic view reduces safety demand.

(emphasis mine) [my comment]

Dollar Falls to 2009 Low as Economic View Reduces Safety Demand
By Matthew Brown and Yasuhiko Seki

July 28 (Bloomberg) -- The dollar fell to the lowest level this year against the currencies of six major U.S. trading partners as speculation the global economy is emerging from the recession reduced demand for a refuge.

The Australian dollar advanced to the highest level since September against the U.S. currency after the Reserve Bank said the economy may rebound faster than forecast six months ago. The euro climbed to a seven-week high against the dollar after Deutsche Bank AG said second-quarter profit rose 68 percent, beating analysts' estimates.

[safer] currencies are trying to break higher," said Ian Stannard, a foreign-exchange strategist in London at BNP Paribas SA, France's largest bank. "Upside potential is limited as euro-dollar has been quite disappointing in recent weeks, given that we've had near-perfect conditions for a rally to develop."

The Dollar Index, which the ICE uses to track the dollar against currencies including the yen, pound and Swedish krona, fell as much as 0.4 percent to 78.315, the lowest level since Dec. 18, and was at 78.509 at 7:30 a.m. in New York, compared with 78.626 yesterday. The euro advanced 0.2 percent to $1.4256 per euro, from $1.4232. The 16-nation currency traded in a range of $1.3833 to today's high of $1.4304 in July.

Gains for the euro may be limited after the European currency met resistance at about $1.4300 today, according to Jane Foley, research director in London at, an online currency trader. Resistance is a level where orders to sell the euro are clustered.

'Softer Tone'

"So far the euro has failed to hold above this level with the slightly softer tone of stock markets in Europe draining some of the enthusiasm for risk and pushing euro-dollar back down," Foley wrote in a research report today.

Europe's Dow Jones Stoxx 600 Index was little changed after better-than-estimated earnings offset a forecast by BP Plc Chief Executive Officer Tony Hayward that any recovery from the first global recession since World War II will be "long and drawn out." Standard & Poor's 500 Index futures decreased 0.4 percent.

U.S. home prices probably fell at a slower pace in May, indicating the U.S. economy is recovering. The S&P;/Case Shiller index of 20 major metropolitan areas, due for release today, will show property values fell 17.9 percent in May from a year earlier, according to the median forecast of 32 economists surveyed by Bloomberg News. The measure was down 18.1 percent in the 12 months ended in April.

'Buy the Yen'
[Buy gold]

"Exporters are prone to buy the yen, given that the end of the month is near," said Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale, France's third- largest bank.

Japanese companies forecast the yen would average 94.85 per dollar in the 12 months to March 2010, according to the Bank of Japan's quarterly Tankan survey released July 1.

Adding to pressure on the dollar,
China's Assistant Finance Minister Zhu Guangyao said on the first day of bilateral talks with U.S. officials that his government remains "concerned" about the value of its U.S. assets. [Agreed]

Zhu's remarks come after repeated public assurances by Treasury Secretary Timothy Geithner that the U.S. is committed to reining in a record budget deficit once an economic recovery is secured. China is the biggest foreign investor in U.S. government debt, and any decline in demand could push up borrowing costs.

"China has massive holdings of Treasuries, so it is obviously worried," said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. "Any diversification away from the dollar could be gradual
[will be swift and brutal], and the greenback [will freefall] may weaken a bit."

The Dollar Index

My reaction: The dollar has fallen to a 2009 low. I won't go into the falling dollar now, as I am getting ready to publish another major article tying everything together everything I have written about over the last few months. It will be titled something like "What the dollar's freefall will look like" and will outline the stages of the dollar's collapse:

Stage 1: Pressure builds until commodity shortages reach breaking point
Stage 2: The collapse of commodity paper substitutes
Stage 3: Central bank exodus from dollar assets
Stage 4: The collapse of US credit markets
Stage 5: *****The collapse of US derivative markets*****
Stage 6: The end of Wall Street and Hyperinflation
Stage 7: US economic disintegration

It should be done sometime on Tuesday.

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15 Responses to Dollar Falls to 2009 Low

  1. Anonymous says:

    Oh Eric I am wanting to see that article.

    Really, I can't wait!

    Keep up the good work!

    The Anonymous Coward

  2. Robert says:

    Something may be going on with physical gold prices.. seems that the premium over spot is going down.

    goldline's coins page

    Krugerands are now selling at just 6.9% over spot. This is the smallest premium I've seen in over a year.

  3. Matte says:

    Maybe this from Leap2020 is interesting for you:

    When China prepares its « Great Escape » from the dollar-trap for the end of summer 2009

  4. Your pieces are fantastic. We are waiting.

  5. lec721 says:

    Leap 2020 link was interesting. Thanks, Matte.

    The Chinese are very shrewd. Anyone who thinks China is going to sit back in subservience and miss a potential opportunity to elevate themselves to super-power status is mistaken.

    Eric, I am looking forward to your post. Keep up the good work.

    While I will not be celebrating a US currency crisis, I do wonder how low the dollar index will have to go to silence Anonymous Cowards?

    Tell us, Anonymous Coward, will we still be hearing from you when the dollar index falls into the 60's? How about the 50's? That is what I would like to get a time frame on.

  6. Jimmy says:

    Like many people, I believe in US dollar collapse. However, I have not seen it yet. Why? The dollar index was about 72 early last year. Now it stands at 78. Why do people talk about dollar collapse now? It will happen, just not yet. Maybe in a few months.

  7. Anonymous says:


    "Tell us, Anonymous Coward, will we still be hearing from you when the dollar index falls into the 60's? How about the 50's? That is what I would like to get a time frame on."

    I'll be here, for I don't fear being wrong.

    Though I don't believe I'll be wrong ;)

    To be clear though, I never stated a dollar collapse wouldn't happen, no.

    What I stated, and still maintain, is things will be (very much) different then what you are expecting.

    So yeah, I'll be around - if only to see the horror in your eyes.

    /gives an evil laugh

  8. Natasa says:

    What I stated, and still maintain, is things will be (very much) different then what you are expecting.

    I think that it would be very interesting to read even your explanations too.
    Why not writing about it shortly?

  9. Matheus says:

    I just can wait !
    Bring it on !

  10. Anonymous says:


    I think that it would be very interesting to read even your explanations too. Why not writing about it shortly?"

    Maybe I'll take you up on that soon ;)

    And when I do I'll let you all here know ;)

  11. lec721 says:

    FYI, Anonymous Coward --

    I am set either way, dollar collapse or not.

    I am 100% out of debt (yes, my house is paid off)

    And I have also spread around my holdings just in case of disaster.

    When the dollar index goes down below 65 or so, we'll see if you are still yammering.

  12. Jimmy says:

    It is difficult to prepare for both deflation and hyperinflation at the same time. In deflation, debt is a killer. In hyperinflation, debt is good.

    I would pay down debt asap in case of deflation; I would borrow as much as possible to buy gold, silver, food, in case of hyperinflation.

    I am more inclined to high inflation a few years down the road, maybe sooner. Remember, the government and the Fed (which is NOT a government agency) want inflation. Currently the US government spends money like no tomorrow. At the same time, tax revenue is declining like a stone in the sky. Deflationists talk about slow money velocity. They forget much less production ( except for the green paper).

  13. FA in CA says:

    Looking forward to the read. Thanks for your time and work!

  14. ronin says:

    i, too, will be eager to read that article to see if it's along the same lines as to what my intuition tells me.

  15. Venkat says:

    Dollar make an intermediate bottom early Aug 09.

    For details

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