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To: SouthFloridaGuy who wrote (196737)	10/10/2002 9:28:29 AM
From: Box-By-The-Riviera™	Respond to of 436258

only to you i'm afraid.

To: SouthFloridaGuy who wrote (196737)	10/10/2002 11:23:57 AM
From: stockman_scott	Respond to of 436258

US dollar to undergo adjustment phase By JAGDEV SINGH SIDHU Thursday, October 10, 2002 MAJOR currencies in the world are expected to strengthen against the US dollar next year as the American economy undergoes an adjustment phase to correct excesses and weaknesses, according to visiting Standard Chartered Bank chief economist and group head of global research Dr Gerard Lyons. He said the ringgit peg was ex-pected to be maintained on account of its sustainability and because it was forcing local companies to be competitive. “I think it is a more difficult environment now and the dollar needs to adjust lower. The US economy is softening,’’ Lyons told Star Business during an interview in Kuala Lum-pur yesterday. He said there was thought that the dollar was overvalued by be-tween 10% and 25% on a trade-weighted basis and that the euro and the yen could appreciate against the greenback by the second half of the year. “The euro will strengthen by default, not because the euro zone is a strong growth area but because European investors would be wary about investing in American assets,’’ he said. “Europeans have kept more of their money at home this year. They have not sold US assets but they have been deterred from putting more money in the US,’’ he said. Lyons expects strong growth in the US in the third quarter of this year, and said that the growth would supported by continued consumer spending in the final quarter. He said that should a war in Iraq be swift and the price of oil fall, sentiment on the US dollar would be stimulated in the 1st quarter of next year. “It is always possible that the dollar would hold on quite strongly against the euro until we move into next year, but then any problem would be reflected in the gradual strengthening of the euro as the US stock market is overvalued,’’ he said. According to Lyons, the situation with the yen is far more complicated as the Japanese authorities have to grapple with the country’s anaemic banking sector. “The market would be prepared to test a weaker yen in the near term. In the next few months you could also see the dollar holding on to its strong position against the yen,’’ he said. “But likewise, the yen will hold up and strengthen next year.’’ Lyons sees the dollar trading be-tween 1.05 and 1.08 against the euro in the second half of next year and the yen appreciating to 115 against the greenback in about nine months. According to Lyons, the ringgit peg “is fairly protected at the mo-ment’’ and, barring any major weakness in the yen and a revaluation of the Chinese currency, he does not foresee any change with the peg. “It is almost like a stability-overrides-everything policy when it comes to pegs in Asia, in terms of China and Malaysia,’’ he said. “The benefit of the peg at the moment is that it forces Malaysian industry to become competitive.’’ Lyons believes that the US government would be less tolerant of the continued build-up of dollar reserves by Asian countries as it deals with its economic weaknesses. “Asian central banks have accumulated reserves in recent years as the 1997 crisis showed that some countries were solvent but not liquid. To prevent that recurring, Asian central banks have accumulated dollar reserves,’’ he said. “The US was previously tolerant of that as it served its best interests. It prevented any crisis in Asia and it made it easier for the US to finance its trade deficit.’’ He said, however, that the situation had changed and the US might now want to see a weaker currency as it deals with sputtering economic growth. “Therefore, I think the US authorities will be less keen on Asian central banks keeping their currencies competitive. I think there will be a lot of international pressure, particularly if Asian growth next year is healthy,’’ Lyons said. biz.thestar.com.my