And so the Dollar Weeps

I had last written on 29th January 2008, stating that "the green back to maintain a level of 103 to 108 against the Yen (with a bias towards 100 though beating the 103 mark may be difficult) while weakening against the Euro to near 1.49 in the very near future". The basic premise behind that was the fact that the jobless, housing and inflation data and the subprime crisis all were tending to drag the US currency outlook down. Add to it the fact that most US banks declare their balance sheets in Feb end to Mid March and that this time round, they were going to be not so rosy, thanks to the sub prime. One point I refrained from writing here (possibly out of the fear that this might be too big a prediction) but had been discussing with a few colleagues and friends, was a guess of mine that there may be a couple of Banks in the US that may fail.

Quoting now from Bloomberg "Stocks slid yesterday after slower-than-forecast economic growth, rising jobless claims and Federal Reserve Chairman Ben S. Bernanke's warning of possible failures among smaller banks deepened concern that the economy has tipped into a recession.
U.S. equities, as measured by the S&P 500, fared the worst among the world's 10 largest markets in February on concern that a recession is inevitable." Unquote.

All said and done, although the US seems sliding into recession, I believe Bernanke and his team will make all efforts to keep it low key although with the profile that this man keeps, it is difficult to do so. My personal belief on the USD JPY and the USD EUR pair now......The Yen should now keep itself to the narrower 103 to 106 range with a bias towards 100 (and now looking more possible .... below the 100 mark), though I still believe that breaking the 103 barrier may be a tough nut to crack. There though is a spoke in this story. With the Yen strengthening as it is, and with the huge comforts (I am told) that the traders had in the 105 to 108 range, it should not come as much of a surprise if the yen again climbs to those levels. Though weakening much further may be more of a distant thing. The European economy has not been hampered much in the current market sentiments and should remain to perform like it has been doing in the recent past......Moderately to be more precise. The Euro should be seeing further new highs of near 1.54 and 1.55 but staying consistently above 1.54 may be an issue. I believe the Euro will tend to keep itself happy in the 1.52 to 1.5350 range with a downward bias every now and then. Amen.