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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: MulhollandDrive who wrote (40046)	5/19/2003 8:20:25 AM
From: MulhollandDrive	Read Replies (1) \| Respond to of 57110

Dollar Falls on Snow Comment, Pushing Euro to Four-Year High New York, May 19 (Bloomberg) -- The dollar plunged, sending the euro above its starting level for the first time since January 1999, after Treasury Secretary John Snow suggested he won't act to stem the U.S. currency's 22 percent decline in the past year. The yen weakened to a record low against the euro and erased gains against the dollar on investor speculation the Bank of Japan was selling its currency to slow its gains. Snow said Saturday the dollar's losses are ``fairly modest,'' signaling the U.S. is departing from the policy honed during the Clinton administration under Treasury Secretary Robert Rubin and will let the dollar slide to boost the economy, some analysts said. A lower U.S. currency may help push down the price of U.S. products overseas, raising the value of company earnings when sales are converted into dollars. ``The U.S. seems to have an agnostic attitude to the external value of its currency at the moment,'' said Adrian Cunningham, who helps manage $22 billion at Abbey National Plc in Glasgow. ``It's being panned against everything.'' Cunningham said he would be a seller of the currency, adding he holds more euros and yen than suggested by his benchmark. The dollar fell to $1.1670 per euro at 8:01 a.m. in New York from $1.1536 late Friday. It weakened to as low as $1.1737. The dollar's decline took the European single currency to its highest since Jan. 15, 1999, and above its rate of $1.16675 when it was introduced at the beginning of 1999. Snow distanced himself from previous Treasury Secretaries Rubin and Paul O'Neill, both of whom said they advocated a ``strong'' dollar. ``I don't know how (Rubin) defined it,'' Snow told reporters after a meeting of finance ministers from the Group of Seven major industrial countries in Deauville, France. ``I've never had that conversation with Paul.'' Yen Drops The yen weakened to 135.92 per euro, after earlier reaching 135.96, and to 116.50 per dollar. The Japanese currency earlier climbed as high as 115.07 per dollar. The dollar has fallen more than 8 percent versus the yen in the past 12 months. ``It looks like it could have been intervention in dollar- yen,'' said Lee Ferridge, head of global currency strategy at Rabobank. ``It's got all the hallmarks of it.'' Officials at Japan's Ministry of Finance and Bank of Japan in Tokyo and New York declined to comment. The Bank of Japan spent about 2 trillion yen ($17.3 billion) in the space of a week this month to keep its currency from strengthening further than 115 yen, The Nikkei English News reported, citing people it didn't identify. Japan's central bank has spent more than 4 trillion yen this year in the currency market, more than all of last year, the Nikkei said. The yen's rise hurts Japanese exports, which account for 11 percent of the economy. The yen has gained 4.4 percent against the dollar in the past 3 weeks. Honda Motor Co.'s annual operating profit drops about 20 billion yen for every 1 yen the local currency appreciates against the dollar. Stagnant Economies A weaker dollar helps companies such as Eastman Kodak Co., which was saved from a first-quarter loss by the dollar's decline. The European Union and Japanese economies stagnated in the first quarter as their currencies advanced against the dollar. The U.S. ``has to ensure that growth comes from somewhere'' and it seems they're relying on foreign buyers to help, said Abbey's Cunningham. ``The dollar appears to be heading towards $1.20'' to the euro. ``It's the final nail in the coffin for the strong dollar policy,'' said Neil Jones, director of foreign exchange at Nomura International Plc. ``I would avoid buying the dollar.'' Jones sees the dollar falling as low as $1.20 in the next few weeks. Two-thirds of the 30 traders, analysts and investors surveyed by Bloomberg News on Friday recommended buying or holding euros against the dollar. Current Account The U.S. currency is likely to extend a 10 percent drop against the 12-country euro this year as slowing capital inflows from overseas make it more difficult for the U.S. to finance its current account deficit, economists said. ``What investors get for their money in the U.S. is less than they get elsewhere,'' said Paul Samuelson, a Nobel laureate and professor emeritus of economics at the Massachusetts Institute of Technology. Interest rates ``will remain low, and the U.S. has a current account deficit to finance while other countries are still digesting a surplus,'' said Samuelson. ``It doesn't take much to figure out the dollar will continue to fall.'' Last Updated: May 19, 2003 08:06 EDT