USD
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May 15 (Bloomberg) -- The dollar fell to an eight-month low against the yen and traded near a one-year low versus the euro on speculation the U.S. administration won't oppose declines in the currency.

President George W. Bush's government sees a weaker dollar as a way to shrink the country's near-record trade deficit, the Wall Street Journal reported on May 13, without saying where it got the information. U.S. Treasury Secretary John Snow said a strong dollar is in the interest of the U.S., Japanese Finance Minister Sadakazu Tanigaki said today in Tokyo, citing a telephone conversation last week.

``The U.S. administration will sit on the sidelines, giving a couple of quotes now and then that they still want a strong dollar, but really not mean it,'' said George Kapasakis, senior currency trader at Mizuho Corporate Bank in Sydney.

The dollar dropped to 109.66 yen as of 1:08 p.m. in Tokyo, and traded down to 109.33, matching the lowest since Sept. 12, from 110.02 in late New York on May 12. The U.S. currency traded at $1.2923 from $1.2926 against the euro, and reached $1.2972, the weakest since May 5, 2005.

The yen also advanced after China's yuan strengthened beyond 8 to the dollar for the first time since a revaluation in July. The yuan traded at 7.9980 per dollar from 8.0062 on May 12, according to data compiled by Bloomberg.

``A stronger yuan means stronger Asian currencies, so you have to take advantage of that through the yen,'' said Kapasakis. The yen will trade beyond 100 versus the dollar in the next 12 months, he forecast.

Japan Surplus

A weaker dollar would increase the attractiveness of American exports, which rose to a record $114.7 billion in March, according to a Commerce Department report on May 12. The decline also increases the cost of imports to the U.S., helping reduce the trade deficit, which widened to an all-time high of $726 billion last year.

By contrast, Japan's current-account surplus rose 33 percent to 2.39 trillion yen ($21.8 billion) from a year earlier, the Ministry of Finance said in Tokyo today. The surplus in the current account, the broadest measure of trade, was expected to widen to 2.02 trillion yen, according to the median forecast of 22 economists surveyed by Bloomberg News.

Sixty-six percent of the 50 traders, strategists and investors surveyed May 12 from Sydney to New York advised buying Japan's currency against the dollar. Sixty-eight percent forecast the euro will rise versus the dollar for a sixth week, the longest streak since August.

`Strong' Dollar

The dollar, down 8.3 percent versus the euro and 6.9 percent against the yen this year, has accelerated its decline since Group of Seven finance ministers April 21 called for some Asian countries to let their currencies appreciate.

Snow told reporters in Washington on May 10 he favors a ``strong'' dollar with its value set by markets.

The dollar may climb on anticipation its drop is overdone, according to technical indicators on charts that traders watch to predict price movements.

The euro's 14-day relative strength index versus the dollar a measure of momentum, was at 82.1 today, the highest since January 2003. The dollar's index versus the yen was 17.3. A level below 30 or above 70 signals a change in direction.

``We might get some consolidation and even see the dollar try and push higher,'' said Joanne Masters, a currency strategist at Macquarie Bank Ltd. in Sydney. The dollar will reach $1.2820 per euro this week, she said.

Fukui

Demand for yen may increase on speculation Bank of Japan Governor Toshihiko Fukui will signal the world's second-largest economy is growing fast enough to withstand higher interest rates, which may lure Japanese investors to keep money at home.

Yields on Japan's 10-year bonds last week rose to the highest since August 1999 after an opinion piece in the Nikkei Financial Daily spurred speculation the central bank will raise rates as early as next month.

The gap in yields between 10-year Treasuries and similar- maturity Japanese bonds was 321 basis points on May 12, compared with 406 basis points on Aug. 11, 2000, when the BOJ last raised its target for overnight loan rates to 0.25 percent.

``The yen will probably grind higher,'' said Yasuhiro Miyata, who helps oversee the equivalent of about $18.2 billion in assets at DLIBJ Asset Management Co. ``There's a high chance that Japan will raise rates this year, at a time when people's focus is shifting to global imbalances, setting the bias for a stronger yen and a weaker dollar.''

The yen may trade between 105 and 115 against the dollar in the next month, Miyata said.

Fukui is speaking at a forum in Tokyo which started from 12:30 p.m. today.

FX Survey for this WEEK
BUY SELL HOLD
Euro 33 7 10
Yen 34 10 6
British pound 32 12 5
Swiss franc 33 9 5
Australian dollar 29 13 6
Canadian dollar 30 10 8
Euro versus yen 15 19 12

Not Investment Rules but Investment Observations!
1. There is no investment rule that always works.
If there was one single rule, which always worked, everybody would in time follow it and, therefore, everybody would be rich. But the only constant in history is the shape of the wealth pyramid, with few rich people at the top and many poor at the bottom. Thus, even the best rules do change from time to time.

2. Stocks always go up in the long term.
This is a myth. Far more companies have failed than succeeded. Far more countries' stock markets went to zero than markets, which have survived. Just think of Russia in 1918, all the Eastern European stock markets after 1945, Shanghai after 1949, and Egypt in 1954.

3. Real Estate always goes up in the long term.
While it is true that real estate has a tendency to appreciate in the long run, partly because of population growth, there is a problem with ownership and property rights. Real estate in London was a good investment over the last 1000 years, but not for America's Red Indians, Mexico's Aztecs, Peru's Incas and people living in countries, which became communists in the 20th century. All these people lost their real estate and usually also their lives.

4. Buy Low and Sell High.
The problem with this rule is that we never know exactly what is low and what is high. Frequently what is low will go even lower and what is high will continue to rise.

5. Buy a basket of high quality stocks and hold!
Another highly dangerous rule! Today's leaders may not be tomorrow's leaders. Don't forget that Xerox, Polaroid, Memorex, Digital Equipment, Burroughs, Control Data were the leaders in 1973. Where are they today? Either out of business or their stocks far lower, than in 1973!

6. Buy when there is blood on the street.
It is true that very often, bad news provide an interesting entry point, at least as a trading opportunity, into a market. However, a better long term strategy may be to buy on bad news, which has been preceded by a long string bad news. When then the market no longer declines, there is a chance that the really worst has been fully discounted.

7. Don't trust anyone!
Everybody is out to sell you something. Corporate executives either lie knowingly or because they don't know the true state of their business and the entire investment community makes money on you buying or selling something.

8. The best investments are frequently the ones you did not make!
To make a really good investment, which will in time appreciate by 100 times or more, is like finding a needle in a haystack. Most "hot tips" and "must buy" or "great opportunities" turn out to be disasters. Thus, only take very few investment decisions, which you have carefully analyzed and thought about in terms of risk and potential reward.

9. Invest where you have an edge!
If you live in a small town you may know the local real estate market, but little about Cisco, Yahoo and Oracle. Stick with your investments in assets about which you may have a knowledge edge.

10. Invest in Yourself!
Today's society is obsessed with money. But the best investments for you may be in your own education, in the quality of the time you spend with the ones you love, on your own job, and on books, which will open new ideas to you and let you see things from many different perspectives.

Most admired investor
The investors I admire the most are Jesus Christ, Mohammed and Buddha. By not seeking material wealth, but by appealing to peoples' human instincts and needs, they inadvertendly created the only businesses, which have thrived and survived until today. In purely capitalistic terms, Francisco Pizarro was by far the most successful investor, since he captured Peru, which subsequently with its Potosi mine supplied most of the world's silver in the 16th century, with just 168 soldiers.

Favorite Book: "The Alchemist" by Paulo Coelho
This is not a typical investment book written by another Wall Street shark or by someone who won a lottery and then writes how you can with his system also win the lottery. This book, however, will give you an insight that in order to fulfill your dreams much hardship will have to be endured and also that you must do things no one else would remotely consider doing. It is a book you will never forget and never regret having read.

Best Investment
Stock markets in Korea and Taiwan in 1979, Philippines and Thailand in 1986, Chile, Argentina, Brazil, Peru in 1988, Japanese Nikkei puts in 1989, staying out of Asia after 1994.

Worst Investment
Shorting US stocks too early. It was very painful in 1999 and early 2000.

Regrets
I have always taken full responsibility for my actions and never blamed anybody else for what went wrong. As a result I have no regrets. However, lending money to friends has been a disappointing experience since neither has ever any of the money lent ever been returned nor did the friendship continue!
(source: Marc Faber Limited GloomBoomDoom.com)

Analyst Recommendation
I remember before about lehman brothers recommendation. About a month before, lehman had recommended buying CHF and NOK against the Dollar. That was the recommendation.....and later a few weeks the CHF and NOK did gained nicely.


Another thing was there recommendation on JPY.....Look at where USD/JPY now. It already broke the 110.00 level.

I am not saying that we SHOULD ALWAYS FOLLOW their recommendation. But its worth watching. As USD/JPY moves downward it seems that we always hear "Verbal Invervention" coming from Japanese Finance Ministers.

<em>Japan hasn't sold yen since March 16, 2004, when the yen closed at 108.77 per dollar. The Bank of Japan, acting for the Ministry of Finance, sold 14.8 trillion yen ($134 billion) in the first three months of 2004. It sold a record 20.4 trillion yen in 2003, starting at about 118 per dollar that January(Bloomberg)

Lehman Brothers Recommends Buying MXN against the Dollar

Lehman Brothers recommends buying Mexican Pesos (MXN) and Chinese Yuan (CNY).

The firm also recommended investors place bets that the U.S. dollar will decline versus the Mexican peso. The peso traded at 10.8918 per dollar, up 1 percent in 2006.

``Although the peso already started to rally, it's not too late to catch the train,'' McCormick wrote. ``The trade picture has started to look considerably brighter.''

The nation's gross domestic product in the first quarter ``is likely to show significant acceleration,'' he said.

The economy is expected to have growth 5.4 percent in the three months ended in March, compared to 2.7 percent growth in the previous quarter, according the median estimate of economists surveyed by Bloomberg News. It would be the fastest rate of growth since 2000. (Bloomberg)

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