Greenspan doesn't expect a rapid decline in dollar
Saturday, 20 October 2007
Kim Kyoungwha and William Sin
Former Federal Reserve Chairman Alan Greenspan doesn't expect a rapid decline in the dollar should nations sell more of their holdings of U.S. Treasuries, according to people attending a forum in Seoul today.
``When asked whether there will be a plunge in the dollar in case China offloads its U.S. Treasury holdings, Greenspan said it's already-known information that won't trigger any rapid drop in the U.S. dollar,'' said Kong Dong Rak, a fixed-income analyst with Hana Daetoo Securities Co., who attended the presentation. ``His view is that markets are clever enough not to overreact.''
Greenspan was speaking via satellite from Washington and media were excluded from his presentation. The conference was hosted by Maeil Business Newspaper.
Japan, China and Taiwan sold U.S. Treasuries at the fastest pace in at least five years in August as losses linked to U.S. subprime mortgages sparked a slump in the dollar. The dollar has fallen 7.5 percent against the euro this year as the Federal Reserve cut interest rates last month to support the housing market, reducing the yield advantage of U.S. fixed-income assets.
The dollar weakened to $1.4229 per euro at 1:37 p.m. in Tokyo from $1.4208 in New York yesterday. It fell to $1.4283 on Oct. 1, the lowest since the European currency's debut in January 1999. The U.S. currency traded at 116.47 yen from 116.68.
Japan cut its holdings of U.S. Treasuries by 4.0 percent to $586 billion, the most since a new benchmark for the data was created in March 2000, Treasury Department figures released this week showed. China's ownership of U.S. government bonds fell by 2.2 percent to $400 billion, the fastest pace since April 2002. Taiwan's slid 8.9 percent to $52 billion, the most since October 2000.
Kim Gyung Rok, chief investment officer of Mirae Asset Investment Management Co. in Seoul, also confirmed Greenspan's remarks on the dollar. ``Foreign-exchange markets have already priced in bit by bit'' the possibility of an unloading of U.S. Treasuries, he said.
Greenspan is ``of the opinion that holdings of foreign- exchange reserves tend not to be moved easily,'' Kim said.
China's foreign-exchange reserves, the world's biggest, rose to a record $1.43 trillion at the end of September, adding pressure for faster yuan gains to prevent Asia's second-largest economy from overheating.
Greenspan said China's policy on the yuan ``could cause long-term instability in the Chinese economy,'' according to Ben Arber, Seoul-based head of global payments and cash management at HSBC Holdings Plc, who attended today's forum.
China's central bank manages the nation's yuan against a basket of currencies and allows it to rise or decline daily by up to 0.5 percent against the dollar from the so-called central parity rate.
Greenspan repeated earlier remarks that the chances of a U.S. recession are between a third and a half, according to HSBC's Arber.
Hana's Kong said that ``the U.S. housing market is not in a good shape but Greenspan sees the economy supported by the stock-market rally.''
The International Monetary Fund yesterday lowered its forecast for global growth next year and warned that even its new prediction may be too optimistic given threats posed by the sell-off in credit markets.
Greenspan said the U.S. slowdown is unlikely to lead to a recession in the world's biggest economy, though will still have a negative effect on Asian economies, according to Maeng Young Jae, a deputy general manager at Samsung Securities Co. in Seoul. ``Greenspan seems more optimistic about the U.S. economy than pessimistic.''
The IMF cut its projection for the global expansion next year to 4.8 percent from an estimate of 5.2 percent in July. A weaker outlook for the U.S. was mostly to blame, as the fund slashed its forecast to 1.9 percent from 2.8 percent.
Greenspan, who headed the Fed for 18 years until January 2006, has been promoting his book, ``The Age of Turbulence,'' which was released last month.
Bloomberg
Former Federal Reserve Chairman Alan Greenspan doesn't expect a rapid decline in the dollar should nations sell more of their holdings of U.S. Treasuries, according to people attending a forum in Seoul today.
``When asked whether there will be a plunge in the dollar in case China offloads its U.S. Treasury holdings, Greenspan said it's already-known information that won't trigger any rapid drop in the U.S. dollar,'' said Kong Dong Rak, a fixed-income analyst with Hana Daetoo Securities Co., who attended the presentation. ``His view is that markets are clever enough not to overreact.''
Greenspan was speaking via satellite from Washington and media were excluded from his presentation. The conference was hosted by Maeil Business Newspaper.
Japan, China and Taiwan sold U.S. Treasuries at the fastest pace in at least five years in August as losses linked to U.S. subprime mortgages sparked a slump in the dollar. The dollar has fallen 7.5 percent against the euro this year as the Federal Reserve cut interest rates last month to support the housing market, reducing the yield advantage of U.S. fixed-income assets.
The dollar weakened to $1.4229 per euro at 1:37 p.m. in Tokyo from $1.4208 in New York yesterday. It fell to $1.4283 on Oct. 1, the lowest since the European currency's debut in January 1999. The U.S. currency traded at 116.47 yen from 116.68.
Japan cut its holdings of U.S. Treasuries by 4.0 percent to $586 billion, the most since a new benchmark for the data was created in March 2000, Treasury Department figures released this week showed. China's ownership of U.S. government bonds fell by 2.2 percent to $400 billion, the fastest pace since April 2002. Taiwan's slid 8.9 percent to $52 billion, the most since October 2000.
Kim Gyung Rok, chief investment officer of Mirae Asset Investment Management Co. in Seoul, also confirmed Greenspan's remarks on the dollar. ``Foreign-exchange markets have already priced in bit by bit'' the possibility of an unloading of U.S. Treasuries, he said.
Greenspan is ``of the opinion that holdings of foreign- exchange reserves tend not to be moved easily,'' Kim said.
China's foreign-exchange reserves, the world's biggest, rose to a record $1.43 trillion at the end of September, adding pressure for faster yuan gains to prevent Asia's second-largest economy from overheating.
Greenspan said China's policy on the yuan ``could cause long-term instability in the Chinese economy,'' according to Ben Arber, Seoul-based head of global payments and cash management at HSBC Holdings Plc, who attended today's forum.
China's central bank manages the nation's yuan against a basket of currencies and allows it to rise or decline daily by up to 0.5 percent against the dollar from the so-called central parity rate.
Greenspan repeated earlier remarks that the chances of a U.S. recession are between a third and a half, according to HSBC's Arber.
Hana's Kong said that ``the U.S. housing market is not in a good shape but Greenspan sees the economy supported by the stock-market rally.''
The International Monetary Fund yesterday lowered its forecast for global growth next year and warned that even its new prediction may be too optimistic given threats posed by the sell-off in credit markets.
Greenspan said the U.S. slowdown is unlikely to lead to a recession in the world's biggest economy, though will still have a negative effect on Asian economies, according to Maeng Young Jae, a deputy general manager at Samsung Securities Co. in Seoul. ``Greenspan seems more optimistic about the U.S. economy than pessimistic.''
The IMF cut its projection for the global expansion next year to 4.8 percent from an estimate of 5.2 percent in July. A weaker outlook for the U.S. was mostly to blame, as the fund slashed its forecast to 1.9 percent from 2.8 percent.
Greenspan, who headed the Fed for 18 years until January 2006, has been promoting his book, ``The Age of Turbulence,'' which was released last month.
Bloomberg