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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (694)	8/18/2001 6:08:40 PM
From: craig crawford	Read Replies (1) \| Respond to of 1643

Editorial comment: Decline in the dollar Published: August 17 2001 19:24GMT \| Last Updated: August 17 2001 19:26GMT news.ft.com Currency markets do funny things in the lazy days of summer, and movements that look decisive in August can disappear in September. All the same, there is no doubt that the mood has shifted against the dollar in recent weeks. ............................................................................................................................. Until recently, the strength of the dollar has seemed to feed on itself, almost like a giant pyramid selling scheme. For the past six years, strong overseas demand for US assets increased the dollar's value, thus improving the return that foreigners received on dollar-based assets and encouraging yet greater demand for the US currency. The fundamentals of the US economy, such as the enormous current account deficit, took a back seat. .............................................................................................................................. The US also faces risks. Pyramid schemes rarely deflate gradually - they tend to collapse suddenly, causing significant pain. The IMF calculates that the US needs to attract some 7¾ per cent of the world's gross national savings to fund its current account deficit. These capital flows, abundant for the past few years, may haemorrhage quickly, causing general instability. ............................................................................................................................ Continental Europe's primary concern would be if the fall in value of dollar-based assets had an important effect on confidence. Europe, after all, accounts for nearly two-thirds of total foreign private holdings of US stocks and bonds.