Dollar’s decline may prompt joint intervention, Morgan Stanley says

Dollar’s decline may prompt joint intervention, Morgan Stanley says

Stanley White
Bloomberg News
November 5, 2007

The decline of the dollar to record lows might turn into a “more violent correction” that requires the United States, the European Union and Japan to intervene in foreign exchange markets, analysts at Morgan Stanley say.

Coordinated intervention could occur after the U.S. Federal Reserve has finished cutting interest rates and the European Central Bank has ceased raising them, according to Morgan Stanley, the investment bank.

Japan might act if the dollar approached ¥100, the bank added. But the three major economies are unlikely to intervene as long as the euro stays below $1.50, it said.

“The dollar could potentially weaken meaningfully further,” two Morgan Stanley analysts, Stephen Jen and Charles St-Arnaud, wrote in a note sent to clients late last week. “Though coordinated interventions may not be an immediate threat, they should now be on our radar screen.”

The dollar index, a measure of the U.S. currency against six others, fell to 76.331 on Friday, the lowest reading since it was created in 1973 and down from 77.03 at the end of the previous week.

The euro traded at $1.4505 at the close of trading in New York, up from $1.4393 a week ago. The dollar bought ¥114.853, little changed on the week.

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Veteran investor calls Bernanke `a nut’ over rate cut

November 4, 2007

US Federal Reserve Chairman Ben Bernanke is “a nut” and interest-rate cuts by the central bank are harming the US economy by fueling inflation, investor Jim Rogers said.

“Bernanke loves printing money,” Rogers said in an interview in New York. “This man is a nut. The dollar is collapsing, commodities are going through the roof, which means inflation’s going through the roof. These people are leading us to terrible problems down the line.”

Rogers, the 65-year-old chairman of Beeland Interests Inc, also said he was selling short shares of Citigroup Inc, the biggest US bank, and Fannie Mae, the largest provider of money for US home loans.

Investors should buy commodities and the Chinese currency, Rogers said.

The Fed this week cut its benchmark interest rate by a quarter point to 4.5 percent. Policymakers have now lowered their target rate for overnight loans between banks by 0.75 percentage points in six weeks, the most aggressive easing since the economy was emerging from its last recession in 2001.

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