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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: SOROS who wrote (86937)	6/15/2002 7:13:28 PM
From: marek_wojna	Read Replies (1) \| Respond to of 116927

Somehow this sound more convincing to me than calling for the another bottom of the greenback. <<06/15 10:16 Dollar May Extend Drop as Trade Deficit Grows: Currency Outlook By Geraldine Ryerson-Cruz New York, June 15 (Bloomberg) -- The dollar may drop for a sixth week, its longest slide against the euro since August 2001, as evidence of a swelling trade gap underscores how much the U.S. relies on foreign capital to buoy its currency. A four-week slump in U.S. stock indexes has sapped demand for dollars and suggests international investment in the U.S. won't be enough to offset a growing current account deficit. Last year the deficit sent $417 billion out of U.S. hands. Further stock declines will likely broaden the dollar's 7.9 percent dive so far this quarter against the euro, investors said. ``When the economy was doing well, the rest of the world was quite happy to finance that deficit,'' said Christopher Iggo, an economist at Cazenove & Co. Fund Management in London, which invests $18 billion. Now, ``they prefer to keep more of their money at home,'' which hurts the U.S. currency. The dollar fell to 94.61 U.S. cents per euro, down 0.2 percent this week. It touched a 17-month low of 95.20 yesterday and is headed toward its biggest quarterly decline ever against the euro, which started trading in January 1999. Against Japan's currency, the dollar's 6.4 percent loss is its steepest quarterly decline since the July-September period of 1999. The currency is trading at 124.13 yen per dollar. The U.S. currency may fall further on expectations the government Wednesday will say the nation's trade deficit grew to $32.1 billion in April, the biggest since March 2001, based on a Bloomberg News survey of economists. Recovery Slowing Another government report will likely show the gap in the U.S. current account, the broadest measure of international trade as it includes investments, grew to $108 billion in the first quarter from $98.8 billion in the fourth quarter last year. Those figures mean ``we need more than $1 billion a day and we're not getting it, so the dollar's falling,'' said Craig Larimer, head of international market research at Banc One Capital Markets in Chicago. ``We don't have to have people withdrawing investment in the U.S. to send the dollar lower, we just have to have them putting less in.'' U.S. consumer optimism and retail sales fell more than expected this month, reports this week showed, signs the economy's rebound from recession may be cooling. While the world's largest economy grew at a 5.6 percent annual pace in the first quarter, it will ebb to a 2.9 percent rate in the current period, according to the latest Blue Chip Economic Indicators survey. The sluggish rebound in the economy and company profits, mixed with concerns about terrorism and corporate accountability, has sent stocks tumbling. The Standard & Poor's 500 index is down 12 percent, the Dow Jones Industrial Average has fallen 8.5 percent and the Nasdaq Composite index has sunk 19 percent. ``The same negative sentiment that has affected the U.S. stock markets is affecting the dollar,'' said Banc One's Larimer. It may slip to 97 cents per euro in coming weeks, he said. Good for Exports A declining dollar may help narrow the trade gap by making U.S. exports more competitive. It could also help U.S. companies doing business overseas by boosting the value of their foreign earnings when converted back to dollars. The dollar slid 2.6 percent in April against a trade-weighted basket of seven currencies and has since dropped 3 percent more. ``On a trade-weighted basis, the dollar could go another two to three percent lower'' in coming months, Cazenove's Iggo said. ``Sentiment is so depressed that any bad news will send the dollar lower.'' Any help to reducing the current account deficit from a weaker currency may be a long time coming, some investors said. The dollar is trading at higher levels on a trade-weighted basis than it did for most of the period between 1987 and 2001. It is also still 23 percent stronger than when the 12-nation euro started trading. ``I don't think well see an improvement in the (trade) data for quite some time,'' said Harriett Richmond, who oversees $60 billion in currencies at J.P. Morgan Investment Management. Group of Seven Investors and analysts were divided about whether foreign exchange will be discussed at a meeting of the Group of Seven industrialized nations this weekend in Halifax, Canada. Japanese Finance Minister Masajuro Shiokawa said the yen won't be on the agenda at the meeting of finance ministers from the U.S., U.K., Japan, Germany, France, Canada and Italy. The Bank of Japan sold yen on four days between May 22 and June 4 to prevent a rise in the currency's value from threatening an export-led economic recovery. ``It looks as though 123 to 124 has been (a) very, very well defended'' area, said J.P. Morgan's Richmond. Analysts estimate the central bank sold as much as $20 billion worth of yen in recent weeks, she said.