The Federal Reserve announced an unprecedented move yesterday when it decided to cut the target fed funds rate to a range of zero to 0.25 percent. The target benchmark rate is a new low and is part of the Fed's overall effort to combat the recession.
The value of the dollar has been falling since late October when the Fed lowered rates to 1 percent, and it's possible that other currencies like the euro could continue gaining in strength against the dollar. Do you know what the buck is currently worth compared to other currencies? Take the quiz!
1 of 5Question 1
3.1 Phillip Lim
Savvy, I'm usually in complete agreement but not this time. the USD has actually strengthened against almost every currency in the world (BP, Euro, Peso, Real, etc) except for the yen since 1/1/08. The article is misleading - the USD did weaken against from October against the Euro but, overall, it's at the highest point it's been at for a while.
1I'm with Kwikwit on this one. We were trading over $1.60 per Euro earlier in 2008. They day when Jay-Z was counting Euros in the back of a limo, and when Gisele would only take her paycheck in Euros marked the top. If the EuroZone monetary policy begins to reduce rates to fight off a recession or deflation, the Euro loses ground again.
Japan has been sitting near zero percent on their monetary policy for quite some time. Since they can't really lower interest rates more (other than paying you to borrow money), they need to inject trillions of yen to reduce the value of the yen. Toyota and Honda realize a good deal of their revenues and earnings from the US. I wonder if Japan considered bailing out GM and Ford to simply prop up the dollar. It is in their best interest that the US dollar is stronger (Toyota and Honda continue to issue poorer earnings guidance in relation to the stronger Yen). Now here in the US we have companies that benefit from the weaker US Dollar like IBM and HP. I read somewhere that Japan makes up 40% of high-end fashion sales. Imagine how they feel.
And since oil is traded in US dollars, the currency trade totally affects the price per barrel. A weak dollar will typically mean high oil prices.
Where's the equilibrium?
2dienliv, I'm totally with you. I'm very interested in how Japan is going to respond to their strong yen. You know they hate it - Sony/Toyota/Honda are going to take huge FX charges this year due to their exported sales. Also, for an already shockingly expensive country to visit it will become even more so - sayounara tourism.
I wonder if the increase in the yen is because it's the only currency that's probably been undervalued the last few years and the rest of the world is catching up (driven by their rate cuts).
3Japan's currency is at a 13 year high against the US dollar...
http://money.cnn.com/2008/12/17/markets/dollar/index.htm
4Quite a few of the units seem to be off by an order of magnitude in this quiz:
1 yen = USD$0.0113 (that is, just over one cent, not 11 cents as the "correct" answer says)
51 peso = USD$0.076 (same problem)
1 ruble = USD$0.037 (same problem)
Um.... the answer for the yen is wrong. One Japanese yen is worth about a penny... so none of those choices were valid
6theres no use arguing about the differences, they change all the time.
71 out of 5
8wow apparently i know nothing about money
1/5
9Lulla don't feel bad...consider it a learning experience! :pops:
10i meant
!
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