The dollar declines in response to the drop in the target Fed Funds rate. What next?
Category Archives: exchange rates
50 it is
For the first time in 5 years, markets were actually unsure what the Fed was going to do, with yesterday’s fed funds options calling it an even chance that the Fed would settle for a 25-basis-point cut or go all the way to 50. Capital Chronicle had prepared amusing posters as to just how to interpret a 25-basis-point as opposed to a 50-basis-point cut. Fifty it was, disappointing perhaps knzn who wanted a 175-basis-point cut, but delighting economic researchers like Refet Gurkaynak and Eric Swanson who both emailed me their high spirits at finally getting another data point for what happens when the Fed surprises the markets.
Four Observations on Import and Export Prices and the Dollar
Some delayed reflections on exchange rates, trade prices, and the messages from the August data.
Saving Glut Redux
Bernanke recaps his interpretation of the explanation for global imbalances. Is it any more convincing than the first time?
Revaluation and China’s Multilateral Trade Balance: First Estimates
Yin-Wong Cheung, Eiji Fujii and I have just completed a paper entitled China’s Current Account and Exchange Rate” for a conference on China’s Growing Role in World Trade. This paper follows up on some of the issues I laid out in these posts: [1], [2], [3], and [4].
US Economic Growth: Retrospect and Prospect
Some interesting tidbits can be gleaned from the BEA’s recent release. First, despite the acceleration in growth in 2007Q2, the level of output in 2007Q2 is less than what we thought — as of 28 June — it was in 2007Q1. Second, q/q consumption growth now looks weaker than it did before. Third, while net exports provided a big boost to GDP growth, a large chunk of that effect is attributable to import compression, rather than export acceleration. How one views the durability of the net export effect depends in large part upon how one views the sources of import and export trends.
Will Dollar Depreciation Prevent A Recession?
As worries from ever expanding — but always containable — housing and mortgage market collapse mount (see this Reuters article), some analysts believe that the external accounts will save the day. From Bloomberg (July 23):
“We have always thought that America got away with something.”
Well, maybe not anymore. And perhaps not even before.
The quote is from an article on how the weak dollar is raising the costs of traveling to Europe, as the USD/EUR rate flirts with 1.40. The longer quote, from yesterday’s NYT article entitled “As Dollar Crumples, Tourists Overseas Reel”
, is:
More on the Yuan and the Chinese Trade Balance
More speculation on the Yuan’s prospects. From Bloomberg:
Import prices surge…
…but mostly due to increasing oil prices.