The Economy Guy

Issue: 10/26/07 Friday


The week ended on high note if you’re in stock, but in a low note if you’re an American.  The Dow ended up 135 points, but the Euro hit a new high, and so did oil and gold.

Here’s what happened to the Euro.

The dollar skidded to fresh record lows on speculation that U.S. will cut interest rates again as the post G-7 dollar sell-off came into full swing.  The greenback fell to a record low against the euro Friday at $1.4393, according to Interbank foreign-exchange rates from Dow Jones almost half a cent below its last record low of $1.4348, set Monday.

The Canadian dollar is the strongest currency around right now, here’s why.

The dollar also broke through the 96.04 Canadian cents record of modern-era floating exchange rate lows against the Canadian currency, slumping to 95.92 Canadian cents Friday, according to Dow Jones’ Interbank rates, its lowest level in 33 years.  The U.S. dollar has fallen 17.5 percent against the Canadian loonie this year. Canada is a major exporter of oil, benefiting when those prices rise.  ”The fundamentals (behind) that drive appear to be solidly in place and will likely fuel the Canadian dollar higher in 2008,” said Michael Woolfolk, senior currency strategist at the Bank of New York. “If this continues for another year, there will be growing concerns about the currency’s valuation.”

The dollar was weak across the board, and here is what currency dealers think about.

The dollar has soured on the G-7 summit’s failure to address dollar weakness and on a spate of disappointing economic reports from the United States, including a report that showed U.S. orders for durable goods dropped 1.7 percent in September, after an even bigger 5.3 percent plunge in August.
That was the first back-to-back decline in more than a year and took economists by surprise.  The dollar faltered Friday as oil prices surged to new records over $92 in overnight trading and gold futures hit their highest price since January 1980.

Here is an interesting note on gold, as seen by currency dealers.  Wow.  This is big news.

“There’s a call to diversify holdings from the U.S. dollar,” said Woolfolk. Asian central banks and other large holders of dollars-denominated investments see gold, a scarce commodity with growing demand, as a good alternative to the depreciating currency, he said.

Here are Friday’s closing details:
DJ30 – 13,807 (Up 135 points)
10 year US Treasury Bond – 4.39%  (Up 0.04%) – reflecting the increase in stock market.
Euro 1.4398 – Here we go on a new ride up with the Euro!!!!!!!!!!

Gold closed at $788 per ounce. (Up $17) – A new current high.
Oil Closed at $91.86 (Up 1.40) – Ouch!!!
Gasoline is $2.27 (Up 0.04) – My favorite soap box.

 

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