[Mb-civic] Dollar continues decline BBC

[Michael Butler]

 Dollar continues record declines
 The dollar has continued its record-breaking slide against many of the
world's major currencies, with analysts predicting it could fall further.

 Comments by the US administration that it favours a strong dollar failed to
stem losses as analysts say little is being done to match words with
actions.

 They point out that a weaker dollar can help drive export demand, as well
as narrow the current account deficit.

 Also, higher Asian interest rates are likely to lure investors from the US.

 Heading on down 

 The dollar fell to a record low of $1.3059 against the euro in London
trading. It also slid against the yen and hit a seven-year low against the
South Korean won.

 "The US dollar will remain under pressure," Merrill Lynch said in a note to
investors, citing China's attempts to rein in its booming economy as a main
contributing factor.

 The market's selling the dollar now on worries over the U.S. deficit, it's
hard think it will stop soon
  Junya Tanase, a strategist at JPMorgan Chase
 

 Many analysts are predicting that borrowing costs will have to increase if
China's economy is to avoid overheating.

 Should interest rates rise, it will increase capital inflows into the
country, having a positive knock-on effect for other currencies in Asia and
countries such as Australia and New Zealand, Merrill Lynch said.

 "China's economy is slowing, but it has not slowed enough," the investment
firm said, adding that last month's interest rate hike "is not enough, it is
merely the first of many such measures to come".

 Left alone 

 There also seems to be less risk of intervention in the market by countries
such as Japan because the region's currencies have been strengthening
together - meaning they are still as competitive as each other, analysts
said.

 South Korea's Finance Minister Lee Hun-jai said the government would allow
the market to set the won's level and that it did not have a target value to
defend.

 Should traders try to shift the market, however, then its stance will
change, he said.

 "The government hopes everything goes on appropriately based on supply and
demand in the market," said Mr Lee.

 "But government won't leave it unchecked when the foreign exchange market
shows rapid fluctuations due to speculative forces."

 Accounting hole 

 At the heart of the dollar's problems, however, are imbalances in the US
economy that analysts are less and less willing to ignore.

 The budget deficit and current account deficit have ballooned to record
levels

 On Wednesday, US Treasury Secretary John Snow told the Royal Institute of
International Affairs in London that US policy "is for a strong dollar".

 But his pledges to curb the US budget deficit did little to reassure an
already sceptical market.

 "Because the market's selling the dollar now on worries over the US
deficit, it's hard think it will stop soon," said Junya Tanase, a strategist
at JPMorgan Chase. "It's a deep-rooted problem."
 Story from BBC NEWS:
 http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/4021447.stm

 Published: 2004/11/18 13:42:48 GMT

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