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To: Giraffe who wrote (43094)	10/15/1999 9:43:00 PM
From: Giraffe	Respond to of 116764

Dollar slumps By Christopher Swann Steep falls in US asset prices sent the dollar tumbling lower across the board yesterday, fuelling fears that the US currency may be poised for a long-term decline. Comments by Alan Greenspan, the chairman of the Federal Reserve, on the need for banks to set aside more money as insurance against a collapse in equity prices set the ball rolling. Ostensibly a theoretical discourse on banking risk, his speech was widely interpreted as a warning that US stocks are overvalued. Worrying US wholesale figures, showing producer prices in September rising at their fastest rate in nine years, dealt a further blow to US shares and the dollar. Analysts said that whilst the figures mainly reflected sharp rises in the cost of cigarettes, cars and energy they would heighten concern ahead of next week's consumer price release. Falling US shares then dragged the dollar lower, taking it to seven-month lows against the euro and Swiss franc and pushing cable to its highest level this year. These losses left the dollar more than 7 per cent below its July peak in trade weighted terms. "Currency markets have become obsessed with US equities, with the dollar tracking the Dow virtually on a minute by minute basis," said David Bloom, currency strategist at HSBC. Only against the yen did the dollar's fall seem to hit resistance. Analysts said this reflected anxiety over the possibility of further actions by the Bank of Japan, which has recently showed signs of flexibility over a relaxation of monetary policy. But they said this did not preclude further rises in the yen next week. "There is a strong chance that the yen will play catch up next week," said Michael Lewis, senior economist at Deutsche Bank. The dollar closed the session over a yen lower against the yen at ¾105.6. Yesterday's bout of generalised dollar weakness has intensified concerns that the US currency will now be hounded lower by a full blooded bear market. According to Cameron Crise, currency strategist Warburg Dillon Read, asset price falls could easily degenerate into a vicious cycle for the dollar. "The nightmare scenario - in which falling assets weaken the dollar, boosting inflation and provoking tough and equity-unfriendly action from the Fed - appears more plausible now than a month ago," he said. Ray Attrill, director of analysis at the economic consultancy 4Cast in London, agreed. "It seems like the towering external imbalance is finally coming to haunt the dollar," he said. "The problem of funding this imbalance is only going to get worse as investors repatriate capital as the year end approaches," Mr Attrill added. ft.com