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To: yard_man who wrote (174685)	6/23/2002 11:08:47 AM
From: Haim R. Branisteanu	Respond to of 436258

06/22 11:09 - Dollar May Slide a Record Fifth Month vs Euro: Currency Outlook By Mark Tannenbaum New York, June 22 (Bloomberg) -- The dollar is likely to extend its slide against the euro to a record fifth month in June, as the appeal of investing in U.S. financial assets dims compared with Europe. ``The relative speed of growth is going to be better'' in Europe, and that will lure money away from the world's largest economy, said Michael Aguilar, an economist at J. & W. Seligman & Co., with $25 billion in assets. The U.S. currency dropped 2.7 percent this week against the euro, to 97.12 cents per euro, and reached the weakest level since April 2000. It's lost 3.9 percent versus Europe's common currency so far this month, after dropping every month this year except January. The dollar may reach $1 per euro, its weakest level since February 2000, in the next several weeks, said Brian Garvey, a currency strategist at State Street Corp. in Boston. In addition to better potential returns in Europe, the ballooning U.S. current account deficit is also souring prospects for the dollar by funneling money out of the country, Garvey said. The U.S. budget deficit may cause interest rates to rise and make it harder for the Federal Reserve to foster growth, he said. Traders sold dollars Thursday after the U.S. said its current account deficit grew to a record $112.5 billion in the first quarter, from $95.1 billion in the prior quarter. The increasing gap in the current account, the broadest measure of international trade and investment, drains money from the country and weakens the currency if the U.S. fails to attract money back. With the Standard & Poor's 500 Index losing value in 12 of the past 14 weeks, investors have little reason to favor the U.S., analysts said. Treasury Yields The U.S. government had a $147.1 billion budget deficit for the first eight months of this fiscal year, which began in October, compared with a $137.1 billion surplus in the first eight months of fiscal 2001. Treasury yields may rise as the government steps up debt sales to offset that deficit, working against the Fed's efforts to revive the economy by keeping benchmark rates low, and hurting stocks, Garvey said. The Fed may keep its 1.75 percent benchmark rate unchanged until next year, according to economists at Credit Suisse First Boston, the Salomon Smith Barney unit of Citigroup Inc., and CIBC World Markets. Fed policy makers announce their next decision on rates Wednesday. U.S. economic reports next week may spark dollar losses by showing a rebound in the world's biggest economy is fading, say analysts. U.S. Growth Consumer confidence likely fell in June, the Conference Board is expected to report Tuesday. Consumer spending accounts for two- thirds of gross domestic product. Growth in U.S. gross domestic product will average about 2.6 percent for the second, third and fourth quarters, said Michael Moran, chief economist at Daiwa Securities America Inc. That would be down from an earlier forecast of more than 3 percent. The U.S. expanded at a 5.6 percent annual clip in the first quarter. The rate of expansion in the euro region may double to as much as 3.1 percent next year from as much as 1.5 percent this year, according to the European Central Bank. The initial focus next week may be on Japan's Ministry of Finance. The ministry, which sets currency policy, has ordered the Bank of Japan to sell yen on four days in the past month to try to stem the currency's rise, and some analysts expect more sales as early as Monday. Japanese Exporters The yen had its biggest weekly gain in more than three months this week, sending the Nikkei 225 stock average to its biggest weekly drop in 15 months. Shares of Sony Corp. and other exporters led the drop on concern the currency's rise will crimp their earnings. Japanese officials ``know the importance of a weaker yen'' to foster exports and help fuel growth, said Ram Willner, who invests $350 million as director of international fixed income at Banc of America Capital Management in Los Angeles. He expects the yen to reverse course and fall in coming months. Willner said he's betting the yen will decline against the Korean won, and may make a similar trade on the yen against currencies such as the British pound. Foreign investors have been one source of the yen's gains. They have been net buyers of Japanese stocks for nine straight weeks, according to the Tokyo Stock Exchange. Figures today showed Japan's growth rebound stalled in April as demand for services fell. Growth in the world's second-biggest economy may slow from the first quarter's 1.4 percent expansion, the first in a year, analysts said.