Category: General

Dollar higher in thin trading on last day of 2007

Posted on by lindsay
Despite U.S. strong-dollar policy, greenback did not have winning year

SAN FRANCISCO (MarketWatch) -- The dollar managed gains against most major counterparts Monday, in extremely thin trading conditions on the last day of what was not a winning year for the greenback.

The dollar was on track to lose more than 10% against the euro, more than 6% against Japan's yen and about 2% on the British pound sterling. The dollar index, which tracks the U.S. unit against a basket of six major currencies, was down more than 8%. "2007 is likely to go down as a year that defenders of the dollar would like to forget," said Adam Hewison, president of INO.com, a technical-analysis site. "I would hate to think what would happen to the dollar if the current administration had a weak-dollar policy," Hewison added, referring to the strong-dollar policy that U.S. Treasury Secretary Henry Paulson consistently maintained was in place in his remarks throughout the year. Late Monday, the dollar index was at 76.675, up from 76.190 in late U.S. trading Friday.

The dollar was buying 111.65 yen, down from 112.55 yen late Friday. The euro was trading at $1.4587, down from $1.4715 Friday. In November, the euro rose as high as $1.4967, which was its highest level since Europe's united currency began trading in January 1999. The pound was at $1.9865, down from $1.9932 Friday. The dollar gained against its Canadian counterpart Monday, but was still on track to lose more than 17% for the year. The greenback bought C$0.9981, up from C$0.9805 Friday. In September, the loonie reached parity with the U.S. dollar for the first time since 1976, and hit a modern-day high of C$1.1039 in November.
On Wall Street, stocks closed down Monday but still posted gains for the year. Lingering housing woes. Most analysts ascribed the bulk of the dollar's 2007 woes to the subprime mortgage meltdown and subsequent credit crisis in August, which led the Federal Reserve to embark on monetary easing the following month. Lower rates pressure the dollar, because they reduce the returns on dollar-denominated assets. The Fed's easing was eventually followed by interest rate cuts by the Bank of England and the Bank of Canada.
"At the end of a year which saw the worst credit crunch in over a decade, a deterioration in the outlook for the US economy and the start of a rate cutting cycle by the Fed, followed by the BOE and BOC, markets are closing the year still concerned about the financial markets and the U.S. economy and are pricing in further Fed easing," wrote currency analysts at Brown Brothers Harriman.

Some analysts don't expect a repeat of 2007's dismal dollar performance in the year to come. As the subprime fallout continues to spread to other parts of the globe, the dollar's relative appeal will grow toward the latter half of the year, as U.S. investors bring assets home.
Earlier Monday, data from the National Association of Realtors offered a glimmer of stability in the beleaguered housing sector, showing that sales of existing homes rose 0.4% in November to a seasonally adjusted annualized rate of 5 million, in line with expectations.
But analysts cautioned that the modest uptick likely doesn't herald a turnaround in the sector. "Despite the good news in this report, we could just be in the eye of the storm, as a significant number of mortgages reset early in 2008 will likely increase delinquencies and foreclosures driving prices lower and pushing buyers away," wrote Benjamin Reitzes of BMO Capital Markets Economics. "This could get even worse before it gets better," he added.

Upcoming data
After the holiday, investors will be watching key data releases this week for clues on how the U.S. economy is faring, and whether more interest rate cuts lie ahead. The Institute for Supply Management's manufacturing and non-manufacturing surveys are scheduled for release at 10 a.m. Eastern on Wednesday. Analysts surveyed by MarketWatch are expecting the manufacturing index to be roughly flat in December.
Then on Friday, the nonfarm payrolls report is expected to show that payrolls increased by 70,000, according to economist surveyed by MarketWatch.

Lisa Twaronite reports for MarketWatch from San Francisco.

Outlook and Market Predictions for 2008

Posted on by The INO.com Team


Outlook and Market Predictions for 2008
written by Adam Hewison

This week I am going out on a limb, dusting off my crystal
ball and looking into the future. Here are my predictions
for 2008.

I have to admit that forecasting economic conditions a year
in advance is a challenge. It's a little like predicting how
many hurricanes we are going to see in '08. In other words,
it's not an exact science.

So with that in mind, here goes...

Oh, before I forget, vote in our new poll on the 2008 economy.
Are you bullish or bearish?

Here are my predictions:

* INTEREST RATES: Lower to flat until Q2-Q3 of '08.

* ECONOMY: Softer overall with house values still eroding
and consumer confidence slumping at the same time.
Watch our video on the economy:

* ENERGY: Continued high demand for petroleum products will
keep prices high to higher in the first half of '08 despite
the slowing U.S. economy.
Watch our energy video:

* DOLLAR: We may have seen the worst of it in 2007. Look for
further sideways to defensive action in Q1.
Watch our currency video:

* OVERALL: Many consumers are feeling the pinch of higher
energy prices and higher fuel bills. Property prices
continue to weigh heavily on the market and on consumers
minds. With many home owners using their homes as personal
ATM machines in the past few years, it is now payback time.
Homeowners will begin to shrink from the retail scene as
they begin to have to begin paying back their bank loans.
Overall this will have a negative effect on consumer
spending and will show up in retail stores and sales as
early as this holiday season and continue well into '08.

OUTLOOK FOR STOCKS:

Look for stocks to lose ground in Q1 and Q2 as the full
extent of the wealth robbing housing contraction/credit
crunch sinks in and into the pockets of consumers.
Watch our video on the economy:

DOW: The high that was seen in 2007 at 14,200 is likely to
remain unbroken in 2008. Look for this Index to fall back to
the 11,500 - 12,000 in the next 12 to 18 months.

NASDAQ: We expect that the 2,861 level set on September 31st
is likely to remain for some time to come. We are looking
for a pullback in this index to the 1,900 to 2,000 area in
the next 12 to 18 months.

S&P 500: This index put in a top at 1,576 level on 10/11/07/
We expect to see further erosion in this index back to the
1,300 level as consumers continue to tighten their purse
strings in 2008.

OUTLOOK FOR ENERGY:

The upward trend and continued global demand for crude oil
continues to dominate this market. We expect to see the $100
barrel level to be breached in early Q1 if not before. Once
over $100 we expect to see a rapid move up to the $110
level. Demand and cold weather in the Northeast in Q1 should
continue to exert upward pressure on this market.
Watch our energy video:

OUTLOOK FOR GOLD:

Look for Gold to make all time highs in Q1. The old high of
$850 an ounce set back in 1972 will be broken in 2008 as
nervous investor lose faith in the stock market and the
value of paper money. Look for a move to $900 and beyond in
'08.

OUTLOOK FOR THE DOLLAR

No question about it, 2007 has been a tough year for the
Dollar. It seems to me that the Dollar has been engaged in a
12 round bare knuckles brawl, and is fighting for respect as
we wound down the year. Only in the 11th round (November)
did we see the dollar begin to recover and rest on the
ropes. What surprised us most was that despite a barrage of
bad economic data and a 75 point rate cut in November and
December the dollar didn't go down for the count.

Watch our currency video:

So here's how we see it in Q1 of '08.

EURO/USD: In the short term it appears that the EURO has
topped out against the Dollar at 1.4970 on 11/22. This was
pretty much our target on the upside (1.4950). We now expect
to see the EURO pullback to the 1.4200 to 1.4300 levels in
Q1. The longer term negative dollar trend would only be
reversed if the 1.4000 level was broken in Q1 of '08.

USD INDEX: This index has generally been moving sideways
since November. We are looking for a move back to the
78.00/79.00 area in Q1. This would not be a big enough move
to change the overall negative direction for this index.

USDCAD: Look for more of a two way trading market in the
early part of '08. Resistance should come in around 1.0400
for the USD and support should be evident at .9600.

USDAUD: Look for the USD to continue to improve against the
Aussie dollar in Q1.

USDYEN: We expect to see continued dollar improvement
against the Yen in Q1. We are looking for a dollar recovery
back to the 114.00 to 115.00 levels.

Crystal balls like everything else in in life are subject to
change ... with that in mind as a trader you should remain
vigilant and be aware of what will be some amazing trading
opportunities in '08.

Allow me to thank you for making 2007 our best year ever.
All of us here at INO.com and MarketClub have worked hard to
provide you with up to the minute information and the right
tools for making money in the markets. We are confident that
2008 is going to provide some amazing trading opportunities
for our users and members. We are looking forward to working
with you in the new year and making 2008 your best year
ever.

On behalf of everyone on our team we wish you a safe and
happy holiday season, and a prosperous new year.

This is Adam Hewison,

have a safe and happy holiday season.
----------------------

FOREX-Dollar rises vs yen as trading volume thins

Posted on by lindsay


By Steven C. Johnson

NEW YORK, Dec 18 (Reuters) - The dollar gained on the yen on Tuesday as traders covered their bets against the greenback and began taking profits ahead of year end.

Volumes were thin as investors began closing the books on 2007, leading to jittery trading influenced heavily by technical factors and flows, traders said.

The European Central Bank's extension of $500 billion in two-week loans to euro-zone banks also helped ease anxiety about a year-end credit squeeze, traders said, prompting some investors to wade back into yen-funded carry trades.

"The ECB provided a bit of systematic relief, and that's led to some renewal of risk-taking activity," said Robert Fullem, vice president of corporate foreign exchange sales at The Bank of Tokyo-Mitsubishi-UFJ in New York.

"But it is a very thin market out there, and the few orders that are out there are keeping currencies in ranges," he said.

Investors have long borrowed yen at low Japanese rates to fund purchases of higher-yielding currencies and assets. As a result, the yen's fortunes wax and wane in inverse proportion to market risk appetite.

Late afternoon, the dollar was up half a percent at 113.38 yen

The euro traded at $1.4403

Analysts said the ECB's massive injection bolstered the argument of dollar strength against the euro into year end.

"There is talk that some foreign banks (e.g. U.S. and UK) may have taken in funds as well and at lower rates than they can secure from their respective markets," wrote Win Thin, currency strategist at Brown Brothers Harriman in New York, in a note to clients.

"This may lead to some euro sales as the borrowings are converted and/or hedged. The foreign exchange implications of these money market operations are on the margin, but maybe part of the firmer dollar story that many will overlook," he said.

Investors are also awaiting Wednesday's results of this week's liquidity injection plans by top central banks.

The dollar has benefited over the past week from unexpectedly strong U.S. retail sales and inflation data, which fanned speculation that the Federal Reserve may be less aggressive in cutting interest rates next year.

However, the latest Reuters poll still shows a 40 percent chance of a U.S. recession next year.

The Fed is expected to cut its benchmark overnight lending rate twice by 25 basis points to 3.75 percent in the first half of 2008 and leave monetary policy unchanged for the rest of the year, the poll showed. For details, see .

Adam Hewison, president of INO.com, an information service for traders in Shady Side, Maryland, said the dollar looks poised to continue rallying in early 2008 after falling sharply against most major currencies this year.

"We have seen a fairly healthy correction here. I think we're going to see much more two-way trading in the first and second quarters of 2008," he said.

If interest rates stabilize, he said traders will be pushed to cover dollar shorts, setting the euro up for a test of $1.40 and sending the dollar back into the 118-120 yen range in the first half of the year.

"Bears often make the best bulls and they will have to cover their short positions sometime," he said.


Steven C. Johnson reports for Reuters

(Additional reporting by Lucia Mutikani; Editing by Jonathan Oatis)

*Reuters is a registered trademark and belongs to Reuters