Dollar reaches record low as European Central Bank may let euro strengthen

Section:

Economists Say Dollar Has Long Way to Fall;
15% Drop Urged Against Asian Currencies

By Corbett B. Daly
CBSMarketWatch
Tuesday, November 30, 2004

http://cbs.marketwatch.com/news/story.asp?guid=%7BA9839C5D%2DEA54%
2D422E%2D8D8A%2D0DBC155292B0%7D&siteid=mktw

WASHINGTON --- Despite the steady decline in the
U.S. dollar, the greenback is still only halfway
through its adjustment to the level where it belongs
to avoid a global economic crisis, a group of leading
economists said in a new book released Tuesday.

"The exchange rate of the dollar is going to fall.
That's what we have been seeing over the last three
years. That's what we are arguing here will continue,
and the only issue is the extent to which and the
mode to which it happens," said C. Fred Bergsten,
a former Treasury official and co-editor of "Dollar
Adjustment: How Far? Against What?"

Bergsten and his colleagues at the Institute for
International Economics, a leading Washington
think tank on currency matters, argue that the
dollar should continue its fall in an orderly fashion,
particularly against Asian currencies that have not
appreciated against the dollar as dramatically as
the euro and other western currencies.

The dollar's dramatic decline against the euro has
been "extremely lopsided," holding its value more
than it should have against Asian currencies, a
ccording to the book.

The dollar probed a low against the euro before
rebounding Tuesday, in the wake of interest-rate
comments from a top European official and release
of a U.S. report that showed American consumer
sentiment soured.

The euro was worth as much as $1.3331, its richest
dollar value ever, before falling back slightly. Late in
U.S. trade Tuesday, the euro was quoted at $1.3291,
a gain of 0.2 percent against its U.S. counterpart
compared with late U.S. trading on Monday.

The dollar hit fresh lows against the euro for four
consecutive days last week after Federal Reserve
Board Chairman Alan Greenspan said foreigners
might lose their appetite for dollar assets given the
size of the U.S. current account deficit.

In the book, Bergsten and John Williamson argue
that China, Japan, and other Asian nations should
stop intervening in exchange markets, limiting
their participation in the adjustment process.

"East Asia must play a much bigger role, indeed we
would say a dominant role, in the remaining second
leg of the international adjustment of the dollar and
the correction of the international imbalances,"
Bergsten said. The dollar hit its high against the
euro in the summer of 2001.

The Bush administration has been publicly urging the
Chinese government to move to a more flexible
exchange rate regime. China has fixed its currency
at roughly 8.3 yuan to the dollar since 1994. American
manufacturers complain that the fixed Chinese
exchange rate provides an unfair cost advantage to
China's exports and is costing thousands of U.S. jobs.

The economists said the U.S. should drop its public
insistence that the Chinese allow their currency to
move toward a floating exchange rate and, instead,
argue for a stronger, fixed yuan.

"Clearly we are not indifferent. We want it to go up,"
said Morris Goldstein, author of a chapter on China.

The Chinese should revalue their currency and
institute a new peg at a higher value before moving to
limited flexibility and then allowing the yuan to float
freely on the currency markets.

"That's how most countries that have gone from a peg
to a float without having a crisis as a part of the
process have gone," Williamson said, adding that
Colombia, Chile, Israel, and Poland followed that
pattern.

The problem, of course, is that a stronger yuan
contradicts the so-called "strong-dollar policy"
espoused by Treasury Secretary John Snow and
his spokesmen.

Jawboning the markets "is going to get a bad name
and it may become ineffective in the future if the
secretary of the Treasury continues to declare his
support for a strong dollar, irrespective of the
circumstances," Williamson said, adding "this is
an instrument that also needs to be wielded with
a certain amount of responsibility."

Michael Mussa, a former chief economist at the
International Monetary Fund, said there had already
been "enough" adjustment against the euro in the
near-term.

"It would be useful as a matter of some urgency to
get some movement in Asian exchange rates,"
Mussa said, adding that his former employer needs
"to be substantially more active" in its oversight of
exchange rate manipulation by member nations.

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

Corbett B. Daly covers the White House and the
Treasury Department for CBS MarketWatch in
Washington.

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

To subscribe to GATA's dispatches, send an e-mail to:

gata-subscribe@yahoogroups.com

To unsubscribe, send an e-mail to:

gata-unsubscribe@yahoogroups.com

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

RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS

Free sites:

http://www.jsmineset.com

http://www.cbs.marketwatch.com

http://www.mineweb.com/

http://www.gold-eagle.com/

http://www.kitco.com/

http://www.usagold.com/

http://www.GoldSeek.com/

http://www.GoldReview.com/

http://www.capitalupdates.com/

http://www.DailyReckoning.com

http://www.goldenbar.com/

http://www.silver-investor.com

http://www.thebulliondesk.com/

http://www.sharelynx.com/

http://www.mininglife.com/

http://www.financialsense.com

http://www.goldensextant.com

http://www.goldismoney.info/index.html

http://www.howestreet.com

http://www.depression2.tv

http://www.moneyfiles.org/

http://www.howestreet.com

http://www.minersmanual.com/minernews.html

http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html

http://www.goldcolony.com

http://www.miningstocks.com

http://www.mineralstox.com

http://www.freemarketnews.com

http://www.321gold.com

http://www.SilverSeek.com

http://www.investmentrarities.com

http://www.kuik.com/KH/KH.html
(Korelin Business Report -- audio)

http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)

http://www.resourceinvestor.com

http://www.miningmx.com

http://www.prudentbear.com

Subscription sites:

http://www.lemetropolecafe.com/

http://www.goldinsider.com/

http://www.hsletter.com

http://www.interventionalanalysis.com

http://www.investmentindicators.com/

Eagle Ranch discussion site:

http://os2eagle.net/checksum.htm

Ted Butler silver commentary archive:

http://www.investmentrarities.com/

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

COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS

Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com

Centennial Precious Metals
3033 East 1st Ave., Suite 403
Denver, Colorado 80206
www.USAGold.com
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760
cpm@usagold.com

Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net

El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net

Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com

Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com

Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com

Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel

Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com

Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com

Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com

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

HOW TO HELP GATA

If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.

By check:

Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA

By credit card (MasterCard, Visa, and
Discover) over the Internet:

http://www.gata.org/creditcard.html

By GoldMoney:

http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L

Donors of $750 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled "GATA."

GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.