The scent of competitive devaluations is the air in Japan and Europe

Section:

7:03p ET Friday, November 26, 2004

Dear Friend of GATA and Gold:

In his nightly market commentary, "Mr. Gold," Jim
Sinclair, calls today the day the dollar died.
Admission to Sinclair's Internet site his free
but you have to register:

http://www.jsmineset.com

Appended here are what seem like two of today's
more important news stories about the currency
markets. In the first report, the president of the
European Central Bank seems to be trying, a bit
pathetically, to talk the euro down and the dollar
back up. In the second report, Indonesia joins
the list of countries reported to be considering
diversifying their foreign-exchange reserves out
of the dollar.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

ECB's Chief: Dollar-Euro Moves Unwelcome

From Reuters
Friday, November 26, 2004

http://www.reuters.com/newsArticle.jhtml?
type=businessNews&storyID=6931563

RIO DE JANEIRO, Brazil -- The recent surge in the euro
currency is unwelcome and the U.S. Treasury's
commitment to a strong dollar is important, European
Central Bank President Jean-Claude Trichet said on
Friday.

Speaking on the sidelines of a central banking seminar
the day the euro currency hit a new record high above
$1.33, Trichet said: "Recent moves on exchange
markets of the dollar versus euro are unwelcome."

"I want to underline the importance of recent statements
by the treasury secretary of the United States on his
determination to pursue a strong-dollar policy," Trichet
added in speaking with reporters.

He had no further comment on the economic situation
in Europe.

Trichet was attending a Eurosystem seminar with
central banks from Latin America.

The euro hit record highs against the dollar earlier on
Friday at $1.3329 according to Reuters data.

During the dollar's latest declines against the euro,
Trichet has reiterated his earlier message that currency
moves were unwelcome and "brutal."

Referring to Latin American countries, and especially
Brazil, Trichet said he was "very, very impressed" with
the progress made in such areas as debt management
and the ability to weather external crises.

"It is extraordinarily encouraging to see the progress,"
he added. Trichet also supported Brazilian central bank's
latest interest rate hikes as a means to control inflation.

"There is a global consensus that the central bank has
to deliver price stability and the instrument we have is
interest rates. ... The Brazilian central bank is doing
what is appropriate," he said.

* * *

Chinese Whispers Frighten Currency Markets

By Chris Giles
Financial Times, London
Friday, November 26, 2004

http://news.ft.com/cms/s/d47398da-3fe3-11d9-bd0e-00000e2511c8.html

The dollar fell to new lows on Friday on rumours
that China might shift some of its currency
reserves away from the greenback, highlighting
the dollar-related jitters in financial markets.

The fragility in currency and bond markets has
centred on fears that Asian central banks might
dump US assets to avoid large losses as the
dollar's value falls. The markets' nerves were
highlighted by Friday's investor reaction to a
report, later retracted, that China's central bank
was offloading US Treasury bonds.

The dollar dropped sharply after China Business
News quoted Yu Yongding, a central bank
committee member and a respected professor of
economics, as saying China had cut its holdings
of US government debt.

At one point on Friday, the dollar hit $1.3329 against
the euro before recovering to $1.3287.

On bond markets the yield on the benchmark
10-year US Treasury note was trading at 4.24
percent, up from 4.2 per cent at Wednesday's close.
It was the fifth week in a row that the yield on US
Treasuries had risen.

Prof Yu said he had merely quoted to students in
Shanghai data from the Federal Reserve supplied to
him by a friend at a foreign investment bank, but his
retraction did little to stem dollar falls.

The dollar started the week at $1.3059 and has
declined in every trading day since as traders took
fright at signs that Asian investors might become more
reluctant to fund the US current account deficit.

On Friday, the deputy governor for monetary policy at
Indonesia's central bank said Jakarta might reduce its
reserves of dollar assets if the currency fell further.

On Tuesday, the first deputy chairman of the Russian
central bank said it might increase the proportion of its
reserves held in euros.

Investors have taken the comments as a signal that the
Chinese and Japanese central banks might also be
reconsidering their asset holdings. If either began to
shift into European or Asian assets, the dollar would
plunge and interest rates on US government debt would
rise sharply, damping US growth prospects.

For now, China and Japan have an incentive to retain
US assets because doing so holds down their currencies
and maintains exports. But many economists say the
situation is not sustainable in the long term.

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----------------------------------------------------

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