U.S. Dollar Decline

Well, many people have speculated about an impending decline in U.S. dollar value beginning in 07. It started to break out downward yesterday 11/24/06 against the Euro and other currencies, a little sooner than I expected.

This news, held up against the recent reatail products price drops by Wallmart and it's competitors and lower earnings projections by Home Depot, looks like the beginnings of an unwinding.

This combined with a serious drop in the American housing market, which is worsening, and the corresponding drop in consumer spending, (Oh let's not forget the higher than expected unemployment numbers this week).
All this spells an extreme lack of confidence in the future of the U.S. economy. This, all before the holiday buying season begins.

I don't know about you, but I find this news alarming.
Vern


From CNN World Business
http://edition.cnn.com/2006/BUSINESS/11/24/asiastox.friday.reut/index.html

SINGAPORE (Reuters) --
Shares in Asian exporters such as Honda and Sony fell on Friday, hurt by a weaker dollar after the U.S. currency plumbed a two-month low against the yen and a more than five-month low versus the euro.

"The currency movement is one of the factors behind the selling that we're seeing," said Renji Motohashi, general manager in the equity department of Shinko Securities in Japan.

In trade thinned by holidays in the United States and Japan, the dollar was driven down against the euro on Thursday after a strong German business sentiment survey strengthened expectations that euro zone interest rates would keep rising into next year.

"The euro is appreciating against the dollar due to the rate story," said Toru Umemoto, chief forex strategist at Barclays Capital in Tokyo. "But the yen story is more complicated because of the carry trade and the slowdown of the economy."

Carry trades, in which investors borrow the yen to buy a higher yielding currency, have helped to propel the yen to a succession of all-time lows against the euro this year.

Tokyo's Nikkei share average closed down 1.1 percent, after sinking to its lowest intraday level in two months, while MSCI's broadest index of shares elsewhere in Asia inched down 0.1 percent by 0600 GMT.

Honda Motor Co. Ltd dropped 1.2 percent, while rival car maker Toyota Motor Corp. fell 1.7 percent and consumer electronics giant Sony Corp. lost 1.9 percent. In South Korea, Samsung Electronics, the world's top memory chip maker, shed 0.3 percent.

A weaker dollar is generally negative for the exporters that drive many Asian economies because it makes their goods less competitive in the United States, a key market, and lowers the value of their U.S. sales in terms of their home currency.