Dollar Falls On News Of Widening Trade Deficit

NEW YORK — The dollar dropped Friday after the government said the trade deficit widened in September, while the 16-nation eurozone officially emerged from recession, luring investors away from the safe-haven dollar.

The buck has declined steadily since spring despite statements of support from government officials. Record-low U.S. interest rates and a recovering global economy encourages investors to transfer funds out of the safety of low-yielding dollar-denominated investments such as Treasurys and into higher-yielding assets like stocks, commodities and emerging-market currencies.

In late New York trading Friday, the 16-nation euro rose to $1.4893 from $1.4866 late Thursday, while the British pound jumped to $1.6672 from $1.6570. The dollar slipped to 89.63 Japanese yen from 90.32 yen.

The dollar also trudged lower against emerging-market currencies such as the Brazilian real, South Korean won and Thai baht – all countries that have struggled to weaken their currency against the dollar this year in order to keep their exports cheap and their economies in recovery.

The decline was "further confirmation that the overall, dominating theme in the market is still that of adding to risk rather than a cautious approach," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto. Every dip back in stocks and corresponding rise in the dollar since the rally began in spring has been a "fairly brief and shallow correction, until investors jump back on the buying-risky-asset bandwagon. Thats what we've seen playing out today once again."

One factor prompting more aggressive buying Friday was the official end to the recession in the eurozone, Strauss said. The EU statistics office said the eurozone economy grew 0.4 percent in the third quarter.

Also on Friday, the U.S. government said the trade deficit widened to $36.5 billion in September, up 18.2 percent from August. Even though American exports rose because of a lower dollar, the surging price of imported oil more than offset the fifth-straight monthly gain in exports.

The trade deficit with China deepened as well. On Thursday, a quarterly report from China's central bank signaled that Beijing may let the yuan resume its appreciation, which was paused last summer as global trade collapsed.

U.S. manufacturers argue that the yuan, which Beijing has effectively pegged to the dollar, is undervalued by up to 40 percent. This makes Chinese goods cheaper for consumers and businesses, but it makes American products more expensive for China's huge market.

In other late trading, the dollar dropped to 1.0135 Swiss francs from 1.0162 francs late Thursday, and fell to 1.0517 Canadian dollars from 1.0546.

Comments

[SimJack]

Fiat currency pegged against fiat currency - what's wrong with this picture and what could possibly go wrong? Brother can you spare a yuan?

[Erdgeist]

The U.S. is still the world's leading manufacturing nation* despite the rumors that might suggest other wise. A fall in the dollar should be welcome news. It will create jobs at home by increasing U.S. exports as American goods become cheap. And forcing the Chinese to stop pegging their currency to the dollar should also help.

http://rawstory.com/news/afp/US_still_world_s_biggest_manufactur_10072009.htmll

[Patriot86]

Are you kidding? We do not make much anymore and less and less as time goes by. Even as we speak tech is outsourcing jobs...we would not have a trade imbalance if we made more and exported more...we have exported our good jobs and our prosperity...left with nothing jobs and a shrinking middle class...this mess we are in began with Reagan and the loss of our good jobs...Steel was firsts, then electronics and garments, cars and of course recently furniture.

[Patriot86]

Also, in case you were unaware which no doubt you are...oil will go up as the dollar falls...it is a lose lose situation.

[austin4]

It's sad, when all that is produced in this Country are , Politicians, Bankers, and Lobbyist. While the world, moves forward, the US, is moving backwards. And the Party of NO, is Happy with that.. They are so out of touch with Reality, they blame the present President , of the incompetence of the previous President.

[roberto8ag]

"...they blame the present President , of the incompetence of the previous President."


I blame it in the incompetence of the current President and the incompetence of the previous...

Personally, I can't see the difference between the two.

[bobo5]

Britain is in even more debt than we are.

[NoMoreBail2]

There wont be any positive change for middle and lower class form the Obammi administration. Expect more of the same BS that was 2002-2007. More bonuses for wall street, surging stock market, booming economy, widening wealth gap, surging gas, surging food, unfordable education & health care & surging oil prices, continuation of Iraq/Afghanistan wars, and high unemployment.

hat tip to; http://financeopinionss.blogspot.com

[Haditup2here]

For Geithner, Summers, and all those for the "FREE TRADE" who keeps arguing for the "free market" but talks of conservatism when it comes to the "federal deficit", some one should change the slogan from
"I'T's the Economy Stup!d" to "ITS THE TRADE DEFICIT, STUP!D"

You can't expect to reduce the federal deficit by lending money at the top to Wall Street and Business firms while importing MORE in than what you EXPORT OUT.

[LisaMarieC]

The fed has got to start raising the interest rate. This is ridiculous.

[ElementalPraxis]

They should, but the private banks that own the Fed are getting rich with the dollar carry trade currently. Borrowing at near zero and then using the credit to purchase foreign bonds paying 2-3%. Sure, it's bad for America for her monetary system to be fueling another speculative bubble of paper, but since America doesn't operate her own monetary system, that's hardly a consideration.

[hypnotoad72]

Pity they don't have the APRs like the bulk of the middle class is getting... why aren't our APRs near 0%, instead of 18~30%?

[stargazer13]

let,s see the dollar is worth 4 cents now !!

how much more can we lose before it is worthless ???

Time for the master minds to offer their grand solution !

[dac253]

Maybe the question to ask is; is it worth the money we spend to print it?

[doctorkosan]

The penny is not worth producing - eliminate it.

[Alanlak]

Get a wheelbarrow. The wheelbarrow is the purse of America's future.

[Carolab]

China has no CHOICE but to let the yuan appreciate. Otherwise they are faced with runaway hyperinflation.

By the way, Jim Rogers, China expert and former partner of Warren Buffet says the "dollar rally will last a while" and U.S. Treasuries are the next bubble.

http://jimrogers1.blogspot.com/2009/10/treasuries-are-next-bubble-dollar-rally.html

[totaldisbelief]

?? and when that bubble bursts.......then what?
I hope you're a vegetable gardener...with a garden plot.

[hypnotoad72]

With a sufficiently sized garden. In short, it's a pipe dream.

[Carolab]

Worldwide financial hyperinflation and dollar panic.

[Scarborian]

Wall St says it exports US manufacturing jobs to China because it's more profitable and then complains about the US importing those manufactured goods from China and complains that Americans no longer have the money to spend that those jobs would have earned.

Capitalism is just too dangerous to be allowed to make its own rules, the rules have to be changed to make capitalism work for us, not against us.

[IndelibleVoice]

Cosign and fanned!

[whatbox]

Things will get really interesting when the Treasury starts defaulting on T-bills.

[dac253]

They don't have to default on T-bills, they can just print more money. That money can go straight into the recycle bin because it won't be worth anything, but the bonds will get paid off.

[whatbox]

The more money they print, the more they devalue the U.S. dollar. At some point they will have to bite the bullet and get off that merry-go-round.

[Carolab]

And the imbalance resulting from our trade deficit and enormous foreign investor debt will drive us to Third World status.

[SiberianRat]

The dollar is plummeting against the Russian ruble...the ruble!!

[swift goat pet for truth]

Russia has loads of gas, oil, gold and other commodities.

Plus it has a highly educated workforce working for very little money.

Of course, it also has a really corrupt government and social system run by the Russian Mafia.

[SiberianRat]

Yeah, but the financial crisis smacked Russia hard. Medvedev made a great speech the other day about the need to diversify and modernize. You're right about the salaries, and the prices here are higher on most things than in the US. It amazes me how they even get by.

[hypnotoad72]

"Highly educated workforce". Let's see it. Judging by thew quality of products coming in from other sources, there are a lot of stupid people out there... and "Made in USA" is ***NOT*** printed on the label.

Therefore, we have two possibilities:

1. They are not smarter.
2. It's not about intellect. It's about being cheap. "Aka 'good enough is just about good enough'.

[Artemis34]

Dollar Falls On News Of Widening Trade Deficit

See Warren Buffett explain the problem with the trade deficit in a cartoon:

Thriftville vs Squanderville
http://www.youtube.com/watch?v=5DvuyvuHmJI

The dollar isn't the only thing that will fall if the trade deficit continues to widen.

Basically, the US is the world's largest exporter --- of jobs!

[swift goat pet for truth]

US export jobs because it is advantageous for our Corporations to do so because of our tax policy, which was written by Corporations.

[Artemis34]

You make a good case for PUBLIC campaign financing. That would probably take a constitutional convention though b/c congress wouldn't want to stop the gravy train.

[hypnotoad72]

Then they can pay back the national debt.

[toxicbrainpoison]

We gotta meet our own needs rather than give a multi national country money so that they can pay their employees $1 a day.

[Artemis34]

U.S. Dollar Slips Against Canadian Acorn
http://www.theonion.com/content/node/42363

[swift goat pet for truth]

Not only has Canada run a budget surplus for the last decade or so. but it also followed Keynsian policies, rather than Freidmanite ones.

Meaning, it kept to the old, stogy ways of running banks.
So no Canadian Banks failed due to the economic crisis of the last several years.

[Artemis34]

Exactly, the IMF has called Canada's highly regulated banking system a model for the world to emulate.

No only have banks in Canada not failed but they are well run by people who make far less, proving the executive compensation in the US is not really what is needed to buy quality leadership.

"If this were a ball game you could say that the interventionist Keynes beats the monetarist Friedman in the bottom of the ninth."
http://www.themarknews.com/articles/217-fortune-telling-keynes-vs-friedman