Dollar to Have Eventful Week: Fed, G-7, Bush
Expect some serious bang for the buck in the next few days, an event-filled stretch for the foreign-exchange market.
First, the Federal Reserve's policy committee is expected to raise its key federal-funds rate by a quarter percentage point today -- bringing the target to 2.5% -- and currency traders will be looking for any hints that the Fed is stepping up the pace of future rate moves. Then, tonight, President Bush will deliver his State of the Union address, and investors will be watching to see if he explains his plan for cutting the giant budget deficit, which -- along with the trade gap -- has been a drag on the dollar.
Employment numbers, among the most closely watched of all economic data, are released Friday, and the Group of Seven finance officials meet that day and Saturday. Pronouncements from the G-7 often move the currency market, though expectations are a little lower this time for any major policy changes.
"There hasn't been a week like this for the past six to nine months, maybe longer," says John Taylor , chief investment officer for FX Concepts, a New York-based hedge fund. "I think we'll see a lot of reasons this week for the dollar to go up."
Many analysts still believe the dollar is rutted in a longer-term bear market that could last for years. But the view that the U.S. currency can extend its recent gains, especially against the European currencies, is becoming more widespread. It stands in contrast to year end, when sentiment turned sharply against the dollar over concerns about the widening U.S. budget and trade deficits.
Last month, as the market's focus turned to the growing gap between U.S. and European short-term rates and superior U.S. economic prospects, the dollar edged higher against the euro and yen. This week's headline-grabbing events and data are expected to help clarify whether these dollar-friendly trends are poised to continue, or more likely to fizzle out.
Yesterday, the dollar was little changed. Late in the New York day, the euro was at $1.3046 from $1.3035 Monday. The dollar was at 103.67 yen from 103.63 yen and at 1.1903 Swiss francs from 1.1889 francs. The pound was at $1.8837 from $1.8833.
Ian Shepherdson, chief U.S. economist for High Frequency Economics in Valhalla, N.Y., says the dollar's most important ally right now is the Fed. "What's turned the dollar around is the market's recognition that the Fed is dead serious about raising rates, more or less independent of short-term economic data," he says. "The interest-rate backdrop is now positive for the foreseeable future."
While the Fed is widely expected to raise rates to 2.5% from 2.25%, the market will be examining the Fed's accompanying statement to see if officials continue to believe in raising rates at a "measured" pace, or if they alter that language as a step toward raising rates more quickly.
Mr. Shepherdson expects the central bank to continue raising rates until they are at least above 3% -- and perhaps above 4%, if the Fed accelerates to half percentage-point increases in the second half of the year, a move some now anticipate. He predicts U.S. short-term interest rates will rise to a percentage point higher than Europe's by midyear and to 1.5 to 2 percentage points higher by year's end.
Friday's nonfarm payroll figures also will be closely watched. Adnan Akant, a managing director at Fischer Francis Tress & Watts Inc., a New York money-management firm, says this volatile number is critical because the Fed and G-7 officials often gear their global outlooks to the strength of the U.S. economy. He thinks the recent series of U.S. data suggests a sounder footing for the economy, and that this may also be reflected in Friday's jobs numbers.
A better-than-expected figure would be positive for the dollar, while a disappointing number could cause an immediate selloff. But unless the payroll figure is so bad that it raises doubts about the Fed's determination to tighten monetary policy, it won't be critical to the dollar, Mr. Shepherdson suggests.
State of the Union addresses often aren't crucial events for the currency market, but some think that this year has the potential to be different. The widening budget deficit has been a major drag on the dollar, and skepticism about the Bush administration's ability to curb the deficit is one reason analysts remain long-term bearish on the currency.
Most are skeptical that the president will lay out specific proposals reflecting his intention to halve the deficit over the next four years, but some see at least a chance to start changing perceptions. "Up until this point, Bush has never really focused on the deficit," says Mr. Akant, who thinks signs of resolve could ease some of the negative sentiment.
A G-7 meeting, by contrast, often produces market-moving news. But expectations are limited heading into this conference. A flurry of conflicting statements from Chinese officials about the yuan, which is pegged to the dollar, alternately dashed and raised hopes last week that China was moving closer to a revaluation. Any revaluation by China is expected to boost the yuan, and other Asian currencies in the short run as it would allow their currencies to appreciate without losing a competitive edge to China.
Many analysts now think that whatever the G-7 may declare about the need for China and other Asian countries to allow their currencies to strengthen in an effort to restore more balance to the global economy, Beijing is unlikely to move on its currency and appear it is giving in to foreign pressure.
"While J.P. Morgan agrees that China needs to revalue and probably will take modest steps in that direction in the coming months, we doubt 'now' is the time," a J.P. Morgan currency analyst wrote to clients following comments by a Chinese official.
近期重大事件有助于明晰美元前景
预计未来几天将有一系列影响美元汇率的重要事件发生，对外汇市场而言这几天可谓多事之秋。
首先，美国联邦储备委员会(Federal Reserve, 简称：Fed)的政策委员会昨天像人们预计的那样，将其关键的联邦基金利率上调了25个基点，而货币交易员们将寻找Fed今后将加快加息步伐的任何迹象。接下来，美国总统布什(George W. Bush)将发表国情咨文讲话，投资者将关注他在讲话中是否会阐述其削减美国预算赤字的计划，美国的预算赤字和贸易逆差都是拖累美元汇率下跌的因素。
美国明天将公布就业数据，而七大工业国的财政官员们也将于明后两天举行会晤。纽约一家对冲基金FX Conceptsand的首席投资长约翰?泰勒(John Taylor)说，过去6到9个月或许更长的时间内，还没有哪一周的情况与本周类似，本周的许多事态发展都可以成为推动美元上扬的因素。
许多分析师依然相信，美元仍在一个中、长期熊市的轨道内运行，而这一趋势有可能持续多年。但也有越来越多的人相信，美元能够扩大其最近的涨幅，特别是兑欧洲的货币。
上个月，由于市场的关注点转向了美国和欧洲间短期利率不断扩大的差距以及美国优于欧洲的经济增长前景，美元兑欧元和日圆汇率开始小幅上扬。而本周发生的一系列事件以及公布的经济数据则有助于人们搞清楚，这些对美元有利的发展趋势是否还会持续下去。
High Frequency Economics的首席美国经济学家依恩?谢泼德森(Ian Shepherdson)说，美元目前最重要的盟友是Fed，在可预见的未来，美国的利率环境都是对美元有利的。
虽然Fed已经像人们普遍预计的那样将联邦基金利率从2.25%上调至2.5%，但市场仍将仔细研究Fed公布加息决定时的声明，以了解Fed是否仍然认为需要“有节制”地加息。
明天公布的美国非农就业人数数据也将被各方密切关注。纽约一家资金管理公司Fischer Francis Trees & Watts Inc.的董事总经理阿德南?阿坎特(Adnan Akant)说，明天公布的就业数据至关重要，因为Fed和七大工业国的官员们经常依据美国经济增长的强劲程度来判断全球的经济前景。
好于预期的非农就业人数就业数据将对美元有利，而令人失望的这一数据则有可能引发美元卖盘。但谢泼德森则认为，除非非农就业人数数据糟糕得足以使人对Fed继续收紧货币政策的决心都产生了怀疑，否则该数据将不会对美元产生重要影响。
国情咨文通常对货币市场不具备重要意义，但一些人士认为今年的情况可能有所不同。美国不断增长的预算赤字一直是拖累美元走低的一个原因，而对布什政府是否有能力遏制预算赤字增长的怀疑情绪也是分析师们依旧不看好美元长期前景的一个因素。
人们对即将召开的七大工业国会议并未抱太大期望。中国官员上周就人民币问题发表的言论相互矛盾，相应地，人们对中国即将重估人民币币值的希望也就时而受到支持，时而受到打击。人民币汇率目前与美元挂钩。中国重估人民币币值预计短期内将提振日圆和其他亚洲货币的汇率，因为这将使亚洲各经济体在本币升值的时候不必担心其相对于中国的竞争力会下降。
许多分析师现在都认为，虽然七大工业国在会后声明中可能会要求中国和其他亚洲国家允许其本币升值，以纠正全球经济的失衡现象，但中国政府未必会因此就调整本国货币的汇率，它不愿给人留下自己屈从于外国压力的印象。
