Thread: Feeling Bold, Currency Investors Likely to Dump Dollars

Feeling Bold, Currency Investors Likely to Dump Dollars

Friday, May 8, 2009 9:52 AM

NEW YORK -- The U.S. dollar is expected to fall in the week ahead as positive sentiment from the U.S. April non-farm payrolls report prompts more risk taking and continues the move to higher-yielding currencies.

U.S. employers cut a smaller-than-expected 539,000 jobs in April, the smallest amount since October, according to government data on Friday. The news added to optimism that the labor market and the broader economy may at least be stabilizing. .

With the rise in risk appetite, the euro, the pound and the Australian and New Zealand dollars are all expected to do well against the U.S. dollar in the coming five-day trading period.

"The biggest event risk for the foreign exchange market is now behind us and the positive sentiment from the stronger non-farm payrolls report should provide wind behind the back of higher yielding currencies," said Kathy Lien, director of currency research at GFT Forex in New York. "I expect currency traders to continue to sell U.S. dollars and move into risk-taking positions for the coming week."

The euro rose 1.6 percent against the dollar for the week, its best week since April 5. The euro has gained for three straight weeks, according to Reuters data. The dollar fell 0.2 percent against the yen.

The euro also should get a lift from actions by the European Central Bank announced Thursday. The ECB cut its main interest rate to a record low of 1 percent and said it will buy up bonds for the first time in a bid to stem the euro zone's economic decline and shore up shaky markets. .

But investors also will be closely monitoring equity markets around the world. Economic reports next week will provide investors with new insight into the state of the economy.

"We are watching market sentiment very closely, particularly the reaction of the Dow and global equities," said Michael Woolfolk, senior currency strategist at The Bank of New York Mellon. "If equities begin to correct, the euro/dollar rally is expected to be short-lived, with risk aversion prompting safe-haven buying of the dollar and the yen."

A slew of data is scheduled for release next week.

The U.S. Commerce Department will release international trade data for March Tuesday with economists forecasting a deficit of $29 billion for the month.

The Federal budget for April will be released the same day with investors projecting an $55 billion shortfall.

April import and export prices, retail sales for the same month and business inventories for March are slated for release Wednesday.

Analysts expect import prices to rise 0.4 percent, according to a Reuters poll, with export prices declining 0.2 percent.

April retail sales are expected to fall 0.1 percent overall, but rise 0.1 percent excluding autos month over month.

Business inventories for March are seen falling 1.1 percent.

Thursday see the release of weekly initial jobless claims and the producer price index for April. Producer prices are seen rising 0.2 percent in the headline number and 0.1 percent excluding food and energy.

The consumer price index follows on Friday with analysts seeing no change in the headline number for April but rise 0.1 percent excluding food and energy.

The March Treasury International Capital flows (TICS) report will be released later on Friday.

Rounding out first tier data for the week will be the April industrial output report, seen falling 0.6 percent, the preliminary Reuters/University of Michigan sentiment surveys of consumers for May forecast to post at 66.4.

http://moneynews.newsmax.com/markets/do ... 12309.html

I am surprised it has taken the traders this long to decide to start dumping. I was expecting China (if they really got ticked at us) to dump everything all at once, and they hold over 40 percent of Treasury obligations.
Easily that loaf of bread that today you bought for $3.49 may cost $3.49 billion.

I cannot wait until the audit of the Federal Reserve and the Treasury.

The crooks of the world