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Not Bliss

March 17, 2008

The giant black brick that is my IBM Thinkpad and I are having issues today.

It thinks it can turn itself off whenever it likes. I think it should quit making loud grunting noises and get back to work. If it doesn’t shape up by the end of the day I’m going to have to take it for a time-out with the IT dept.

Until then, let me comment on one other thing that is NOT bliss – the EUR:Dollar rate.

This morning, the dollar hit an all time low against the Euro, trading at the depressing rate of $1.5905: 1 Euro.

This would be swell if I was being paid in Euros and living in the U.S. Instead. I’m living in Europe getting paid in Dollars. Not. Cool.

In all seriousness, it really is an issue. One of the people that I work with has lost thousands of dollars because they didn’t transfer their money into Euros when they first arrived two years ago. They had been considering extending their stay in Brussels (or perhaps transferring to the London office) but the weak dollar gives them pause. 

As for me – I have no idea what to do. Wait for the dollar to strengthen before moving my money over to my European bank account? Or, will doing so just cause me to lose hundreds more as the dollar continues to tank?

For the moment, I’m just going to hope that Forbes is right: 

Market Scan
Turning Point For The Dollar?
03.17.08, 7:48 AM ET

LONDON –

The greenback has become notorious for its decline against the euro and the yen, but its slide became more nuanced on Monday, following emergency action from the United States Federal Reserve to contain the fall-out from the Bear Stearns bailout.

The dollar hit a fresh record low against the euro Monday morning, with the single European currency breaking past the $1.59 barrier during morning trading. By midday in London, the euro had scaled back its rise to $1.58, still one penny above Friday’s closing price of $1.57.

It was a similar story for the dollar-yen, with the dollar plunging 2.1% against the Japanese currency. The dollar is currently worth 96.45 yen, down from Friday’s close of 98.51 yen.

Much of Monday’s volatile trading hinged on the actions of the U.S. Federal Reserve over the weekend. The central bank slashed the discount rate to 3.25%, down from 3.5%, and rubber-stamped JPMorgan Chase (nyse: JPMnews people )’s $236.2 million acquisition of collapsing brokerage Bear Stearns (nyse: BSCnews people ). (See “Bear Throws In The Towel”)

With interest-rate differentials against other currencies set to widen on Tuesday, when the Fed is expected to cut rates further to help revive the American economy, the dollar is not looking like a good, high-yield investment.

But the dollar actually firmed against some European currencies on Monday, including the pound sterling. The pound fell against most major currencies on Monday after the Bank of England announced a three-day, £5 billion ($10.0 billion) auction to temper volatile conditions in the inter-bank lending market.

The greenback rose 0.7% against the British currency, to 49.9 pence. It also gained 0.4% relative to the Norwegian kroner, up to 5.11 kroner, and was up 2.7%, against the South Korean won. It also firmed up against the Canadian dollar and the Indian Rupee.

According to Stephen Jen, currency strategist at Morgan Stanley, the dollar’s improved performance could signal a turning point for the beleaguered currency. “I think fairly soon we are going to see European banks start to reveal bad news,” he told Forbes.com. “It is not possible that only the U.S. will be suffering. The U.K., and sterling, will be struggling.”

Many of the macroeconomic problems faced by the United States are not too distant from Britain’s own experience of a sliding housing market, rising levels of debt, weak consumer spending and a financial sector exposed to market turbulence. But inflation worries kept interest rates on hold this month. (See “Inflation Keeps Europe On Hold”)

Morgan Stanley’s Jen also argued that intervention to stabilize the exchange rates was becoming more likely, though he put the probability at less than 50%.

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