The collapse of Dow Jones Industrial Average, the depreciation of the euro and the failure of the stock market in Europe

Dow Jones Industrial fell against the local problems the United States.

In brief: Weakening euro had a negative impact on the Dow Jones Industrial, the European stock market also showed a record low.

Dow Jones Industrial came to the monthly minimum. So, today the euro-dollar fell to 1.2176. From yesterday’s maximum euro-dollar has fallen by 220 points. Deutsch DAX index shows a decline of 2.22%. Futures on the Dow Jones Industrial Average shows the decline of 239.20 Points or -2.36%. Dow Jones Industrial stood at around 9,899.32 points. A yield of 10-year U.S. Treasuries struck a note of 3% and dropped to a new year at least, the current value of 2.95% (this means that the bonds of our past issues rose in price, and bond new issues of the U.S. Treasury will be able to deploy at a lower coupon rate).

It must be noted and the fall of the dollar-yen to 88.50 yen and the euro to 107.80 (this is a new minimum for the pair since 2001). That is yenovy carry trade impossibly curled. Not bad in this situation feels, and the Swiss franc, which can compete with the dollar and the yen as a currency of refuge. Euro-franc fell to new lows today at 1.3250 (from October 2007 Euro-franc fell to 35 figures). Analytical tape ascertain the reduction of risk appetite in markets, but the reasons for this are not known. There were no significant developments in the markets over the past day has not happened. Even the bond yield of PIGS have not updated yesterday’s highs. Because of the negative on the euro may be mentioned the view of analysts Standart Bank, who believe that the euro is to sell not only against the dollar, but against the currency basket.

You can also otkommentirovat behavior of the Chinese yuan in connection with his recent otvyazkoy from a fixed level. The dollar-yuan, currently located at around 6.7977, then there is no progress in the revaluation after falling couples the first day of the proclamation of the new exchange rate policy on June 19 did not happen. Today, the Head of the International Monetary Fund Managing Director Dominique Strauss-Kahn complimented the plans of China’s revaluation of its currency, adding that he does not expect the sharp appreciation of the yuan. Strauss-Kahn repeated the already well-known argument that “the revaluation of the yuan in the interest of China” and “strong yuan is not a cure for all ills in the trade with the United States.” “I do not expect that a revaluation will take place quickly. We still believe that the Chinese yuan is undervalued,” – he said.

Commentators expect to contain the rising yuan, a year, is projected to increase the yuan to the dollar could be about 5%. For us it is important that the revaluation of the yuan to the dollar’s ongoing fall in the euro will lead to further decline of the euro-yuan (now the couple is at the level 8.28). Given that Europe and China are the world’s largest exporters and apparent competitors (primarily for the market of Europe itself), then, speaking about the euro is cheap or not, it is worth watching just for the euro to the yuan. Obviously, the appreciation of the euro against the yuan unprofitable Europe and vice versa. In late 2004 and mid-2008 the euro-yuan rose to a maximum at 11.20 (the euro-dollar rose to 1.40 and 1.60, respectively, the difference is due to the revaluation of the yuan in 2005). Low the euro-yuan is at very low levels observed in 2002. Historical least a pair in 2000 stands at 6.8. Note that the dollar’s decline in 2000-2008, respectively, was observed not only in relation to the euro, but to all the world currencies, has led to the devaluation of the yuan pegged to the dollar and, thus, helped China win the world market (while the U.S. devaluation of the dollar has not helped – the transfer of production to Asia continued to occur). But Europe is still – one of the main markets for China, and China would be unlikely to tolerate for long a weak euro, with the ability to easily raise it by selling part of its dollar reserves. In our view, China is now suffering a euro-dollar, with some agreement on this account at the international level. We can assume that it will continue until the debt crisis in Europe will not achieve its goals. Over, in our opinion, all this can only test the new euro-yuan mark of 11.20, while in terms revalued the yuan, the euro-dollar will the new historical highs. In the meantime we can only expect a decline of the euro and wondering where in Europe again “break in” debt crisis.

Ukrainian Globalist
2010-06-29 16:03, Economics.

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2 comments к “The collapse of Dow Jones Industrial Average, the depreciation of the euro and the failure of the stock market in Europe”

  1. habu Says:

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  2. Dascia Says:

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