Figures confuse US inflation outlook
April 28, 2005
The U.S. dollar was slightly up Thursday against both the euro and the yen. The dollar was up to $1.2913 in relation to the euro and stood at ¥105.97 against the yen.
Meanwhile, analysts were debating weather just-released gross domestic product (GDP) data was a harbinger of a rising or falling value for the dollar.
The GDP showed 3.1 percent growth in the first quarter, lower than expected However the core personal consumption expenditures (PCE) deflator, which serves as the Federal Reserve’s preferred measure of inflation, had risen to 2.2 percent, up 1.7 percent from the previous quarter.
According to analysts, the first number could indicate to the Fed that it should let up its tightening of the economy, but the second figure is said to imply that the Fed should continue on its current course of tightening measures.
This means that the Fed could face the difficult choice of either controlling inflation or letting unacceptable unemployment levels persist. One expert warned that the economy was on the road to stagflation, but other experts argue that stagflation could actually have the effect of supporting the dollar.
Dollar trading steady again
April 21, 2005
The U.S. dollar was trading almost the same as its overnight close on Thursday. It was up 0.1 percent against the yen at 107.16, but it stayed the same in relation to the euro at $1.3096.
The dollar had been down on Wednesday after news of strong U.S. inflation figures.
The sterling was down in relation to the dollar, falling 0.4 percent from its overnight close to $1.9120. It also fell 0.4 percent against the euro, to 0.6845 on news that UK retail sales had fallen 0.1 percent instead of rising 0.4 percent, as had been expected.
Also having an effect on the sterling was the release on Wednesday of the Bank of England’s Monetary Policy Committee Meeting minutes from April, which showed the committee strongly in favor of keeping interest rates where they are.
The seven to two vote indicated that interest rates would probably remain the same in May as well. Meanwhile, the Swiss frank rose to $1.1740 in relation to the U.S. dollar on Thursday before settling to trade at $1.1775.
Federal Open Market Committee minutes create market uncertainties
April 13, 2005
The dollar had lost ground against the yen and the euro by midmorning on Wednesday in London trading after the release of the March minutes of the Federal Open Market Committee (FOMC) meeting.
Those minutes left open questions about the direction and speed of interest rate change.
More meaning was assigned to comments in the minutes that said it was not currently necessary to speed up “policy tightening” than to the fact that the FOMC had removed the phrase “measured pace” from its policy statements.
Not all analysts were convinced that this was a correct interpretation. However it was thought that the dollar could recover if March US retail sales figures, which were to be released later on Wednesday, were over the predicted 0.5 percent.
The dollar had lost most in relation to the yen and was ¥0.38 lower than it’s close in New York on Tuesday. The euro had gained about 0.1 cent and was trading at $1.2930 at midmorning in London.
Deficit not good, but dollar holds steady
April 12, 2005
The news was not good, but not nearly as bad as expected either on Tuesday when February’s U.S. trade deficit numbers was released.
The trade deficit was $61 billion in February, an all-time high. This was up from $58.3 billion in January, which had also been a record. The increase was laid mostly to increases in crude oil prices.
Some analysts, in explaining the trade data’s small effect on the dollar, said that in order for such news to weaken the dollar substantially over a long period, such news must be a great deal worse than expected.
And, in fact, after an initial fall when the data was released, the dollar sat about the same against the euro at $1.296 in early trading.
Still unknown is what the effect on the dollar will be when the most recent Federal Open Market Committee minutes are released and investors find out what the minutes have to say concerning interest rates.
Dollar lower against flat currencies
April 11, 2005
The U.S. dollar fell in relation to the euro, sterling, the Swiss franc, the yen, and the Canadian dollar on Monday, and analysts say this likely signals an end to a month-long rally in the value of the dollar.
Analysts, citing data showing that by April 5 short positions in the dollar had fallen to their February 8 levels, the point where an early-year rally in the dollar had ended, said that the implication seemed to be that the recent rally was spurred by the liquidation of short-dollar positions.
Trade data due out on Tuesday was not expected to charge the dollar’s position in any significant way. Major currencies, although up in relation to the dollar, remained little-changed otherwise. Sterling was flat in relation to the euro and slightly lower against the yen. The yen, in turn, was somewhat higher in relation to the euro.
Greenspan urges strong mortgage regulation
April 6, 2005
Alan Greenspan on Wednesday urged Congress to both enact stronger regulation and limit portfolios in order to lessen the risk that failure of mortgage finance companies Fannie Mae and Freddie Mac could require government bailout.
The U.S. Federal Reserve Chairman told the Senate Banking Committee that strengthened regulations are essential to protect the U.S. financial system, but that stronger regulations alone would not be enough.
He said that it would also be necessary to limit the portfolios of the two companies, currently totaling $1.5 trillion.
In the past, Greenspan has suggested a cap of $200 billion on the portfolios of each of the two government-sponsored enterprises (GSEs).
The chairman of the Fed admitted that his proposals could increase the perception that Fannie Mae and Freddie Mac, the biggest and second biggest buyers of home mortgages in the United States, are extensions of the government, but he said that the risks of not further regulating the two companies were too high not to act.
Greenspan insists that limiting the portfolios in this way would not increase mortgage rates. Fannie Mae and Freddie Mac were created by Congress to inject more money into the home-loan market in the U.S.
TV news closes chapter
April 1, 2005
The heyday of the broadcast networks’ traditional television news broadcasts may well be quickly coming to a close.
Coming virtually on the heels of the retirements of Tom Brokaw at NBC and Dan Rather at CBS, Ted Koppel, longtime host of ABC’s Nightline has announced that he is leaving both the show and the network at the end of the year.
While ABC News has said they are committed to maintaining the Nightline broadcast in some for in it’s usual time slot, advertisers’ preference for younger audiences could spell the end of the in-depth news program that began in 1980 as a nightly update on the Iran hostage crisis.
Ratings have fallen in recent years, and Nightline was nearly cancelled three years ago. Criticism that ABC was more interested in profits than in informing the public saved it then. It is unclear whether this will be the case when Koppel leaves.
Mortgage lender recovers value as sheds false revenues
April 1, 2005
Things haven’t been so good at Freddie Mac since the new millennium began. An investigation found that the second-largest mortgage-finance provider in the United States had understated its earnings by 5 billion dollars in the years 2000 to 2002.
Among the repercussions of that investigation was a major scandal that led to the dismissal of top executives, major changes in accounting procedures and oversight of their operations, and issuance of restatements of earnings for those years.
The investigation and it’s fallout also resulted in a delay of the reporting of Freddie Mac’s earnings for 2004. The report, when it was finally released on Thursday, showed that its net income had dropped by 42 percent, although the fair value of its assets had actually increased by 13 percent.
The report didn’t seem to worry Wall Street; by the middle of the day Thursday, Freddie Mac’s stocks had gained 1.2 percent.
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