Category: Currency

More Downward Pressure on the Dollar

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This makes it more likely that other nations will be putting part of the foreign reserves in non-US currencies.

This will place further downward pressure on the USD, and further upward pressure on interest rates.

Iran Asks Japan to Pay Yen for Oil, Start Immediately
uly 13 (Bloomberg) — Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran’s central bank said it is reducing holdings of the U.S. dollar.

Iran wants yen-based transactions “for any/all of your forthcoming Iranian crude oil liftings,” according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. The request is for all shipments “effective immediately,” according to the letter, dated July 10 and obtained by Bloomberg News.

The yen rose on speculation for an increase in demand for the currency, the result of Japan’s annual 1.24 trillion yen ($10.1 billion) of oil imports from Iran. Central bankers in Venezuela, Indonesia and the United Arab Emirates have said they will invest less of their reserves in dollar assets because of the weakening currency.

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May import prices rise 0.9 percent, higher than expected – Jun. 13, 2007

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The dollar is falling, pushing up import prices, and interest rates.

This is going to get worse, hitting housing, and the stock market.

May import prices rise 0.9 percent, higher than expected

WASHINGTON (Reuters) — Import prices rose 0.9 percent, the fourth straight monthly gain, on higher petroleum costs, according to a Labor Department report issued Wednesday.

Wall Street economists were expecting to see a 0.3 percent gain in import prices following an upwardly revised 1.4 percent increase in April.

U.S. government bond prices fell Wednesday after higher-than-expected retail sales and import prices exacerbated bond investors concerns that the Federal Reserve might have to raise interest rates next year.

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The Yen-Carry Trades Has a Real Possibility of a Global Meltdown

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The idea is that you borrow Yen at less than 2%, and invest it elsewhere at 4+%, and the difference is pure profit.

The problem? If the dollar, or Euro, or Yuan, falls relative to the Yen, you can end up way in the hole.

This is another problematic feature of the current world trade and currency system. To much speculation, not enough trade and investment, creating volatility and costs.

The increasingly leveraged monetary system is an act of keeping hundreds of balls in the air at the same time, and one day, they will come down.

Dollar Rises in Asia on Yen-Carry Trades
Friday June 8, 4:02 am ET
Dollar Rises in Asian Trading as Investors Swap Yen for Higher Yield Overseas Assets

TOKYO (AP) — The dollar rose in Asia Friday as investors swapped the yen for higher yield overseas assets to take advantage of low Japanese interest rates.

The dollar was trading at 121.16 yen midafternoon, up from 121.11 yen late Thursday in New York. The euro fell to $1.3422 from $1.3432.

Traders said the dollar’s climb likely wouldn’t last, with a global stock fall expected to hurt sentiment for the dollar and the euro.”