Tuesday, September 25, 2007

Dollar record low vs. Euro

This is yet another of the “Fed-rate-cut-related” news, the U.S. dollar hit a record low vs. Euro on Monday with Euro trading at $1.4130. Counter-intuitive as it may sound, some analysts seem to be of the opinion that a weaker dollar is good for the economy, because it will make U.S. goods more easily affordable for other countries, which will allow higher exports. This, in turn, creates more work load for U.S. manufacturers, thus strengthening the job market. The Fed is expected to cut rates again before the end of this year, which may result in further weakening of the greenback. This may boost exports, but prices on imported goods will probably rise, reducing affordability. Economists believe hardships are far from over for consumers, but some of the largest banks are already saying they’ve seen the bottom and things are going to get better from now. Bloomberg.com cites officials at Lehman Brothers and Bear Stearns saying that the worst is “behind us”, and Goldman Sachs said the market is beginning to improve. Is this the beginning of an upward slope?

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