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Tuesday, October 07, 2003

Duisenberg Gives the Dolllar a Helping Hand Down

Just when I thought he'd said his last word, he goes and opens his mouth again! Long term, what he says may be true, but I don't think it's particularly in Europe's interest for him to be saying it, and certainly not now. Also, someone please remind me: why is the geoplolitical situation so much more stable mow than it was back in March?

The US dollar continued its decline on Monday as European Central Bank chief Wim Duisenberg put his weight behind the trend.
In an interview with Spanish newspaper Expansion, Mr Duisenberg - who steps down at the beginning of November - said that the huge US budget deficit made further falls inevitable. Amid thin business on the Jewish holiday of Yom Kippur, traders took that to mean that the ECB would not step in to prevent the euro gaining yet more ground. The result was a 1.2% leap in the euro's value against the dollar to more than $1.17, with the pound sterling up 0.5% to $1.67. Adding to the downward pressure on the dollar was the political situation, as suicide bombings in Israel and Israel's retaliatory airstrikes against Syria ratcheted up the tension.

The dollar's slide has gathered pace over the past few weeks, as the traditional "strong dollar" stance of successive US administrations has been seen to weaken. The trend was set in stone after last month's meeting of G7 industrialised nations, which alluded to the need for "more flexible" currencies - code for a slide in the dollar. The US is particularly keen to see Asian currencies appreciate, a situation the Bank of Japan and the People's Bank of China are keen to avoid. Stronger than expected jobs data unveiled on Friday checked the dollar's fall for a while, but analysts said it was not enough to change the trend. In the meantime, some of the European finance ministers meeting in Germany may not be pleased. The French and German economies in particular are in trouble with soaring deficits and stagnant performance, and a stronger euro could harm export prospects.
Source: BBC News

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