US setbacks see dollar plunge to near 15-year low: Knowledge Driven Revolution

The dollar tumbled to a near 15-year low against sterling yesterday on fresh signs of economic trouble in the United States.

An 8.3pc crash in US industrial orders and an admission by the Federal Reserve chairman that Washington does not know how bad housing really is set off another day of wild gyrations on the currency markets.

The Federal Reserve chairman Ben Bernanke said Washington did not know how bad a state the American housing market was in

US house prices fell 3.5pc to an average $221,000, the third month of declines. Stocks of unsold homes rose to 7.4 months' supply, the highest since 1993. The US consumer confidence index fell sharply to 102.9.

The "truckers index" of tonnage shipped by US haulage companies was down 1.8pc in October, a leading indicator of contraction. Merrill Lynch called the fall "borderline recessionary".

The dollar continued its slide against the euro, dropping to $1.3194 after the Federal Reserve chairman, Ben Bernanke, said the housing slump "would be a drag on economic growth into next year". Mr Bernanke said official figures did not pick up the "sharp increase" in cancellations on house deals and might understate the inventory glut.

"Any significant effect on consumer spending arising from further weakness in housing would have important implications for the economy," he said.

The pound briefly touched $1.95 and surged to eight-year highs against the yen.

The Japanese currency has been in freefall for months on repeated weak data. It suffered a fresh blow yesterday after retail sales fell for a second month, increasing fears that Japan's export-dependent economy may slow in lock step with America.

The OECD club of rich nations gave warning yesterday in its bi-annual economic outlook that the world's second-biggest economy was still too fragile after years of debt deflation to risk a rapid rise in rates from 0.25pc.

"The return to price stability is proving longer and less assured than expected. Further monetary tightening should wait until a fully-fledged exit from deflation finally materialises," it said.

The OECD downgraded its global growth forecast for the 30 leading economies from 2.9pc to 2.5pc in 2007, and said the US might need to start cutting interest rates next year.

Chief economist Jean-Philippe Cotis said there was no cause for alarm, arguing that the US would achieve the "soft-landing" it eluded after the dotcom bubble in 2000. "What the world may be facing is a rebalancing of growth," he said. "In the euro area, recent hard data suggest that a solid upswing may be under way. Growth should remain buoyant in China, India, Russia and other emerging economies."

In a rare piece of good news that helped calm Wall Street after the equity rout on Monday, Mr Bernanke said inflation had been "somewhat better behaved of late".

David Lereah, chief economist for the US National Association of Realtors, said there might be light at the end of tunnel for the housing market, citing a slight rise in transactions.

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HOME Rouge States and the 9/11 Truth Terrorists Canadians Should Pay NOT to be Poisoned: NDP V for Vendetta - R for Reality Canadian Bird Flu Pandemic Looming ? Shill of the Week: Stephan Harper Aspartame: The Sweetest Killer Chicken Little Terrorist of the Week: Creating Fake Terrorists Shill of the Week: Paul Martin The Number 1 Reason YOU became a Slave	US setbacks see dollar plunge to near 15-year low Ambrose Evans-Pritchard - London Telegraph December 01, 2006 The dollar tumbled to a near 15-year low against sterling yesterday on fresh signs of economic trouble in the United States. An 8.3pc crash in US industrial orders and an admission by the Federal Reserve chairman that Washington does not know how bad housing really is set off another day of wild gyrations on the currency markets. The Federal Reserve chairman Ben Bernanke said Washington did not know how bad a state the American housing market was in US house prices fell 3.5pc to an average $221,000, the third month of declines. Stocks of unsold homes rose to 7.4 months' supply, the highest since 1993. The US consumer confidence index fell sharply to 102.9. The "truckers index" of tonnage shipped by US haulage companies was down 1.8pc in October, a leading indicator of contraction. Merrill Lynch called the fall "borderline recessionary". The dollar continued its slide against the euro, dropping to $1.3194 after the Federal Reserve chairman, Ben Bernanke, said the housing slump "would be a drag on economic growth into next year". Mr Bernanke said official figures did not pick up the "sharp increase" in cancellations on house deals and might understate the inventory glut. "Any significant effect on consumer spending arising from further weakness in housing would have important implications for the economy," he said. The pound briefly touched $1.95 and surged to eight-year highs against the yen. The Japanese currency has been in freefall for months on repeated weak data. It suffered a fresh blow yesterday after retail sales fell for a second month, increasing fears that Japan's export-dependent economy may slow in lock step with America. The OECD club of rich nations gave warning yesterday in its bi-annual economic outlook that the world's second-biggest economy was still too fragile after years of debt deflation to risk a rapid rise in rates from 0.25pc. "The return to price stability is proving longer and less assured than expected. Further monetary tightening should wait until a fully-fledged exit from deflation finally materialises," it said. The OECD downgraded its global growth forecast for the 30 leading economies from 2.9pc to 2.5pc in 2007, and said the US might need to start cutting interest rates next year. Chief economist Jean-Philippe Cotis said there was no cause for alarm, arguing that the US would achieve the "soft-landing" it eluded after the dotcom bubble in 2000. "What the world may be facing is a rebalancing of growth," he said. "In the euro area, recent hard data suggest that a solid upswing may be under way. Growth should remain buoyant in China, India, Russia and other emerging economies." In a rare piece of good news that helped calm Wall Street after the equity rout on Monday, Mr Bernanke said inflation had been "somewhat better behaved of late". David Lereah, chief economist for the US National Association of Realtors, said there might be light at the end of tunnel for the housing market, citing a slight rise in transactions. Read the full article here Broken Link? If the link to the original article is broken or has been altered you can view the article by clicking here. About KDR \| \| Home \| \| Weekly Features Archive	Weekly Features Archive
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