Washington Times - Geithner gaffe roils markets
The dollar plummeted by as much as 1.3 percent against the euro within 10 minutes of his remarks. But then the greenback quickly recouped most of its losses after Mr. Geithner retracted his statement and said, "I think the dollar remains the world's dominant reserve currency." Later in the day, as concern weighed down the dollar again, White House spokesman Robert Gibbs chimed in to the now universal chorus from top officials that the administration expects the dollar to be the world reserve currency for "a long, long time."
But the damage may already have been done. By afternoon, a poor showing of buyers at a Treasury bond auction sent interest rates sharply higher, raising fears about the U.S. ability to sell a massive load of $2.5 trillion of debt this year. Buyers may have been spooked not only by the Treasury secretary's remarks but also by the unveiling of budget plans on Capitol Hill that would double the amount of debt the Treasury has to sell in the next five years to nearly $12 trillion.
"They are opening the spigots and flooding the market, and there is no end in sight to the deluge of supply" of Treasury bonds, said Louise Purtle, analyst at CreditSights.
"The poor communication from the Treasury Department has complicated the market for Treasuries," said Jeffrey Caughron, chief market analyst at the Baker Group investment firm.
No comments:
Post a Comment