The US$ tumbles

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The US$ took a major tumble yesterday, as traders decided the Bear Stearns news meant there was little risk of central bank intervention. Against the Japanese yen it fell almost 2.5% during the day, closing at ¥97.35, as shown on the chart. It also fell 2% against the Swiss Franc to SwFr 0.98, and continues to hit new lows against the euro.

The $ is now at its weakest since 1971 on a trade-weighted basis. This will have a major impact on chemical company results:

Winners will be those who buy feedstocks in dollars, and sell in hard currencies such as the euro, yen or SwFr.
Losers will be those who buy in hard currencies, and sell in dollars

US exporters are likely to do well as a result. But one should expect to hear cries of real pain from the losers as Quarter 1 results are reported.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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