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Politics : Foreign Policy Discussion Thread

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To: lorne who wrote (1323)	12/30/2002 7:32:49 PM
From: Hawkmoon	Read Replies (2) of 15987

Well, there is a bit of economic news that I perceive to be pertinent to recent events. It's my opinion that the Bush administration has decreased it's support for a strong dollar as leverage in obtaining Europe and Asia's support for his Iraq and N. Korean policies. A weaker dollar will drastically impact nations that export to the US. And since we're not seeing much evidence of inflation, a weakening of the dollar to a certain extent would be permissible: Dollar hits fresh lows as war fears persist By Jennifer Hughes in London Published: December 30 2002 9:52 \| Last Updated: December 30 2002 22:00 The euro hit a fresh three-year high on Monday against the dollar as the US currency retreated across the board despite fears of intervention to weaken the yen by the Bank of Japan. The euro reached a peak of $1.0474 before lunchtime on Wall Street as traders faced scant interest and thin liquidity, with many participants still enjoying Christmas breaks. The dollar extended its losses as concerns over North Korea's nuclear programme and the possibility of a war with Iraq continued to weigh on sentiment towards the currency, prompting a further shift into perceived safe havens by jittery investors. There was added pessimism after soft US economic data indicated a slower-than-expected pace of business activity. Countries with current account surpluses were net gainers, and the Swiss franc hit a four-year high while the yen reached a 16-week high despite fears the Bank of Japan could intervene to stem the yen's appreciation. The franc pushed the US currency back to SFr1.3915. Surpluses imply more hard currency enters a country than leaves it, providing a cushion against sharp currency depreciation should outflows suddenly increase or inflows tail off. Countries with deficits, however, are more at risk of sudden weakness if the inflows needed to sustain the deficit - well over $1bn a day in the dollar's case - were to fall off suddenly. The dollar fell to Y118.45 by midday in New York. "Dollar-yen was wary in Asian hours but now the BoJ has gone home, Europe seems happy to push the dollar lower," said Paul Bednarczyk, currencies strategist at 4Cast economic consultancy. Japanese officials have stepped up verbal warnings against excessive yen strength in recent weeks. The Bank of Japan last intervened in June to weaken the yen at around the same levels the currency trades today. The bank also has a history of using the quiet trading period around Christmas for intervention.

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