This sounds rather serious. But there are always other factors to consider it seems.
How seriously should this be taken?
DRM
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Dollar Slide Accelerates; Risks of Rout Increase
from Yahoo! - http://babyurl.com/QNcvD2
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Dollar Slide Accelerates; Risks of Rout Increase
NEW YORK -- The relentless dollar selling showed no sign of letting up in New York Tuesday, with the dollar sinking to new lows across the board.
In morning trading, the euro was at $1.2794, up from $1.2664 late Monday in New York. The dollar was at 106.17 yen, up a little from 106.07 yen late Monday, only thanks to aggressive dollar bids from Japanese banks on behalf of Japanese monetary authorities, dealers said.
Against the Swiss franc, the dollar was at 1.2256, down from 1.2337, while sterling was trading up at $1.8260 from $1.8060.
If anything, the dollar's slide was accelerating along with the increase in trading volume as investors return to the market after the holiday period. With very little to convince them otherwise, certainly not official rhetoric from U.S. or euro-zone policymakers, they're simply putting on fresh short dollar positions, en masse.
The euro was printing fresh all-time highs and zoning in fast on $1.30, the market's next big psychological target. Meanwhile, sterling was up around two whole cents on the day at new 11-year highs.
The dollar's malaise is widespread, with only official buying -- mainly from Japanese monetary authorities -- and a sprinkling of corporate demand appearing to stand in the way of the current run on the dollar turning into a rout.
Certainly, Japan's position differs from the official line coming out of the U.S. and euro zone, which is one of relative and potentially damaging nonchalance. For example, Federal Reserve Governor Ben Bernanke said Sunday that the risk of a dollar crisis is "quite low," and on a historical measure against a basket of currencies, the dollar isn't actually all that weak.
In this context, it's difficult to see what will, in the very near term, prompt a shift in market opinion and spark a dollar rally. Positive U.S. economic data clearly aren't doing it.
Even the release of a disappointing purchasing managers' index for the euro- zone service industry didn't dent the euro's advance Tuesday. The numbers showed the main index falling to 56.6 last month instead of rising to 58.5 from 57.5 in November as expected.
The stark difference in official rhetoric between Japanese officials on the one hand and U.S. and euro-zone policymakers on the other was highlighted Tuesday by Japanese Finance Minister Sadakazu Tanigaki. He warned that the MOF will "take proper action when the market moves rapidly."
His comments are in stark contrast to Mr. Bernanke's, and appear to be backed up by firm action. Dealers estimate the MOF bought around $5 billion or more Monday to prevent the dollar from falling below 106 yen, and have bought at least another $2.5 billion Tuesday.
Japanese exporters are also becoming more vocal about the yen's strength, which makes their products more expensive abroad.
Toyota Motor President Fujio Cho said Tuesday that the yen currently appears " a bit too strong" against the dollar.
Neil Jones, director of foreign-exchange sales in London at Nomura International, said it surely can't be long before euro-zone exporters start to protest the euro's strength, too.
"There are parallels appearing with the euro zone and Japan," Mr. Jones said, adding that the bloc's exporters will likely increase pressure on the European Central Bank to at least verbally intervene to halt the euro's appreciation. " I'd be amazed if there wasn't any verbal intervention [with the euro] at $1.35," Jones said.
As ridiculous as that scenario may have looked even a few weeks ago, it doesn't seem quite so outlandish now.