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The Goldman Sachs Group, Inc. Message Board

  • jaguarsxxxv jaguarsxxxv Aug 8, 2008 6:29 PM Flag

    Currency NEWS, read this: The effects of Paulson and Bernanke

    This sounds so funny, as if we dont know the US dollar is going up by manipulation and or by the gangsters in the banking world all over the world.

    These headlines on Bloomberg are hilarious, as if suddenly every other currency besides the US dollar has problems, LOL.

    Euro Falls Most in Eight Years on Reduced Bets for Higher Interest Rates

    Canadian Currency Posts its Biggest Weekly Loss Since 1971 on Jobs Report

    Mexico's Peso Drops the Most in Two Years on Bets Bank to Buy Dollars

    Ruble Falls Most in 2 1/2 Years as Georgia Says Russian Jets Bombed Towns

    Pound Falls Against Dollar to 21-Month Low on Concern Recession Is Looming

    Rand Slumps Versus Dollar, Posts Biggest Weekly Drop in 2 Years on Metals

    LOL, Pound falls on concerns of recession, so why is the US's going up?

    HAHA, I'm holding up a champagne glass, lucky I was long today, here's to you, you mothrfkers!

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    • Try this

      So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here's the proof.

      When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly.

      On July 16, 2008 (the closest date of the weekly reports to the July 15th low in the Dollar Index), the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. To put this phenomenally high growth rate into perspective, for the twelve months ending this past July 16th, assets in the Federal Reserve's custody account grew by 17.3%, which is less than one-half the growth rate experienced over the past three weeks.

      So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others. So central banks pushed in one direction and funds and traders then stepped on board. In other words, central banks ignited the fuse of a bear market rally.

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