Everybody wants to talk about dollar''s fall but action is something else

Dollar Falls Against Euro, Yen,
As G-20 May Not Act to Halt Drop

By Rodrigo Davies
Bloomberg News Service
Friday, November 19, 2004
a href=http://quote.bloomberg.com/apps/news?http://quote.bloomberg.com/apps/new...
pid=10000006amp;sid=ar8qsaLX.Kkcamp;refer=home

The dollar fell against the euro and the yen on
expectations that finance ministers and central
bankers from the Group of 20 largest economies,
who gather today in Berlin, will fail to halt the
U.S. currency's slide.

quot;The U.S. continues to follow a policy of benign
neglect and has no interest in supporting the dollar
at current levels,quot; said Simon Derrick, head of
currency strategy at Bank of New York in London.
quot;The idea that there's going to be any kind of
accord coming out of this meeting I find hard to
believe.quot;

The dollar, which as dropped to a record against
the euro five times in two weeks, will weaken
beyond $1.31 should U.S. Treasury Secretary
John Snow rebuff European complaints about
the pace of the dollar's drop, Derrick said.
German Economy Minister Wolfgang Clement
said in an interview that European Central Bank,
U.S., and Asian policy makers should take action.

Against the euro, the dollar fell to $1.3027 at 7:09
a.m. in New York, from $1.2961 late yesterday,
when it dropped to a record $1.3074, according to
electronic currency dealing system EBS. The U.S.
currency also declined to 103.71 yen, from 104.18,
after dropping as low as 103.58, the weakest since
April 1.

Snow said on Nov. 17 in London that agreements
to manage currencies are quot;at best unrewarding and
checkered.quot; In Bangkok today, Clement said it's
quot;the task of all big economiesquot; to prevent quot;sudden
changesquot; in currencies.

The G-20 includes the Group of Seven industrialized
nations plus the biggest emerging economies.
Federal Reserve Chairman Alan Greenspan and ECB
President Jean-Claude Trichet are scheduled to speak
in Frankfurt at a panel discussion on the euro at 8:30
a.m. New York time.

quot;I don't think you're going to get a coordinated effortquot;
to push the dollar higher, said James McCormick,
head of currency strategy in London at Lehman
Brothers Holdings Inc. quot;U.S. policy makers are happy
with a weaker dollar as long as it's an orderly move.quot;

Lehman, the most accurate forecaster of exchange
rates in a Bloomberg survey last quarter, lowered its
predictions for the dollar on expectations record U.S.
current-account and budget deficits will diminish
demand for the U.S. currency.

quot;The big story for 2005 is that the dollar downtrend
continues,quot; said McCormick at Lehman. The bank
cut its three-month dollar forecasts to $1.34 per euro
from $1.30 and to 102 yen from 104. quot;As we move
into the second half of the year, the yen really takes
on the lead in this dollar down-move.quot;

The yen headed for its eighth consecutive weekly
gain against the dollar, the longest such rally since
at least 1998, amid speculation that Prime Minister
Junichiro Koizumi's administration won't try to reverse
its advance. Japan spent a record 32.9 trillion yen
($320 billion) on currency sales in the year ended
March 31.

quot;We're still some way away from levels which may
start to concern the Japanese monetary authorities,quot;
said Ian Stannard, a currency strategist at BNP
Paribas SA in London. quot;Everything points to the
current move is within the acceptable range for the
Japanese authorities,quot; he said. quot;Around 101 yen
would be where they start to get concerned.quot;

Gains in Asian currencies will outpace the euro,
which may peak at $1.40 next year, according to
Lehman. quot;The nascent rally in Asian currencies
continues to gain pace as markets recognize the
seismic shift in Asian currency policy that is
currently under way,quot; McCormick wrote in a
weekly report.

South Korea's won is heading for the biggest
weekly advance against the dollar in six years,
having soared 3.3 percent, and yesterday reached
its strongest since 1997. The won rose as Finance
Minister Lee Hun Jai told reporters in Seoul
yesterday the government will be guided by quot;the
market's supply and demand' on exchange rates.

quot;The fact that we are seeing this more general
appreciation of Asian currencies will mean that the
Japanese authorities are less concerned about the
yen's appreciation,quot; said Stannard at BNP Paribas.

Traders don't expect Japan to sell yen to weaken
its value, the Nikkei Financial Daily said, citing
unnamed sources. The quot;painquot; of a weak dollar may
have to be tolerated to help the United States
reduce its current account deficit, the report said.

The shortfall in the U.S. current account, the
broadest measure of international trade, widened
to a record $166.2 billion in the second quarter. The
U.S. budget deficit reached an all-time high
$412.3 billion in the fiscal year ended Sept. 30.

The Dollar Index, which measures the dollar against
a basket of six currencies, fell to 83.10 yesterday,
the weakest since 1995, according to data compiled
by Bloomberg.

quot;Japan will be more tolerant of a stronger yen as long
as other currencies are participating in the dollar's
decline,quot; said Thomas O'Malley, head of global
currency portfolio management in San Francisco at
Barclays Global Investors. quot;The pressures on the dollar
aren't going away any time soon.quot;

O'Malley predicts the dollar to decline to $1.35 per euro
and 100 yen in the next few months. Barclays Global
Investors has more than $1 trillion under management.

* * *

Germany's Eichel Calls For Common Plan On Dollar

By Emily Church
CBSMarketWatch.com
Friday, November 19, 2004

a href=http://cbs.marketwatch.com/news/newsfinder/pulseone.asp?guid=%http://cbs...
7B89408EDA-6090-440B-A3CF-B2C8ED972688%7Damp;siteid=googleamp;dist=google

LONDON -- German Finance Minister Hans Eichel is
calling for Europe, Japan, and the United States to
work together on currencies.

In an interview on German radio ahead of this
weekend's gathering finance ministers and central
bank chief from the top 20 economies, Eichel said
quot;within the trioka -- i.e. Japan, America, and Europe
-- we'll have to sit down together and try to reach a
common solution,quot; AFX News reported, citing the
interview with DeutschlandRadio Berlin.

Earlier, in an interview with the Frankfurter
Allgemeine Zeitung, Eichel urged further moves
toward greater exchange rate flexibility among the
West's key Asian trading partners.

Also on Friday, German Economy Minister Wolfgang
Clement called on policy makers to take action
against any sudden drop in the U.S. dollar. The
dollar's fall quot;deserves our whole attention, especially
from those responsible for monetary policy,quot; Clement
told Bloomberg News in an interview in Bangkok. He
didn't specify what action the policy makers should
take, the report said.

The euro was last just above the $1.30 mark, near a
record high hit this week.

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