Thursday, December 21, 2006

Does Christmas boom take the U.S dollar up?



Yesterday, the dollar under-went a minor change against the Euro at a flat rate of $1.3170 and against the Yen Y118.40 on account of the holiday period But the U.S dollar remains to be in the declining stage. The dollar is unable to make development despite the expectations from past weeks that the Federal Reserve is going to lower the interest rates. The dollar’s incompetence to cope up with the present environment is clear evidence that the U.S dollar is not doing well in the currency market and it also proves that the market participants who missed the thanksgiving sell-off are now selling the U.S currencies. Most of the investors are now directly opting for Euro since Euro is standing tall and many are buying Euros’ to make profit.

Amidst these many irregularities, if the Christmas fiesta helps the U.S dollar to cope-up, it really does some good to the U.S economy. But the thing is –Does this holiday period ahead help the dollar to cope-up?

In 2004 also, there was decline in the U.S dollar in the month of December, but nobody panicked because income investors can help themselves by putting part of the dollar decline on their side. If the dollar falls, dividends paid in euros, Canadian dollars or Mexican pesos will translate into a larger number of U.S. dollars. And if the dividends paid by companies that do business in those currencies are worth more to U.S. income investors, the stocks of those companies might rise, adding to the total return investors might reap from these stocks.

And at-last the dollar recovered in the middle of 2005.

So, Lets expect that the U.S dollar will become steady by middle of 2007.

Merry Christmas!!!!!

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