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by Ashraf Laidi
Posted: Dec 16, 2008 19:32
Comments: 14
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This thread was started in response to the Article:

Zero-Bound Fed Breaks Dollar

The Fed's shift to a range-driven fed funds target intensifies the yield assault to the world's main reserve currency.
 
Ashraf Laidi
London, UK
Posts: 0
11 years ago
Dec 17, 2008 5:12
Jeremy, thanks. Im no expert on oil but u must keep in mind what the Fed did today which will provide support for oil in the short term. i still prefer GOLD over OIL. Oil could rise to as high as $60 before retreating lower. Downside to retest 40 in Jan.

Nazar. thanks for the kind words. I agree with you about the euro. It certainly passed several major tests and the diversification of FX reserves is gradually progressing. I predicted in my book that in 2010, wed see 50%-50%. between USD and EUR. Chapter 7 has a whole analysis on central bank diversification. As for competitive devaluations, not sure there will be any trading wars. The devaluations are mainly a result of central bank policies. A key question is when will China's economy recover and gradually get back on its commodity-led spending binge. Once we see that, PBOC can revalue again and we may see 5.0 in 2 year's time.

Ashraf
j nazar
Posted Anonymously
11 years ago
Dec 17, 2008 0:55
ashraf.... liked your call for year end EURUSD at 1.37 few weeks ago when most people were calling it 1.20 or below. interesting hints on year end reversals...

i held euros but hada bit of pressure recently when it went down to 1.23 range but luckily things started to improve. Its clear that FED is digging a hole for the dollar and thats the only option for the US economy - specially when oil has retreated.

As USD is around 65% of world reserve and Euro around 24%, while Yen and Pound have a much smaller role, even when the eurozone also bleeds further, would it still not be the only viable alternately as reserve when more and more central banks consider to decrease their exposure to the dollar? I think this is a strong tail wind for the euro.

Also, I think the euro has passed its major test in the currency markets since its inception. Euro has sustained and eastern europeon currencies have plummeted clearly showing the stability in prices that comes with a multinational currency.

Overall, how do u think china's yuan will behave in the next few years? does it have any chance to become one of the major reserve currencies? how is china going to fund its stimulus package? by selling foreign reserves or by just printing more money and practically devaluing the yuan?

I think we have a wave to competing devaluations coming up between countries combined with protectionism in trade.

best wishes and u r the man!
j
Cameron Trump
Vancouver, Canada
Posted Anonymously
11 years ago
Dec 16, 2008 23:51
$15 bottom, but healthy $20-$35 range for a period of a year to two, then a slow and steady increase, nothing like the speculative mania oil has seen over the past 5-6 years. Gradual increase more akin to a few percent above inflation.
Jeremy
Wisconsin, United States
Posted Anonymously
11 years ago
Dec 16, 2008 21:21
ashraf been following your work for 2 years now outstanding, keep it coming. My question is regarding oil price. considering the near term deflationary enviroment, and the markets unwillingness to trade oil higher despite the significant cut expected on wed. Do you think the market could trade lower after the cut, and what price range do you expect a bottom.