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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (28415)	9/22/2003 11:58:33 AM
From: stockman_scott	Respond to of 89467

Dollar could plumb new lows, say traders _____________________________________________ By Jennifer Hughes in London Financial Times Published: September 21 2003 21:25 The dollar could fall to fresh lows against the yen and weaken against other currencies, foreign exchange traders said on Sunday, after G7 countries called for more flexible exchange rates at the weekend. Japanese exporters would suffer from a stronger yen, which could choke off a nascent recovery in the economy. The G7 communiqué emphasised the need for "more flexibility in exchange rates . . . to promote smooth and widespread adjustments in the international financial system, based on market mechanisms." However, the significance of the statement was later disputed. The US currency ended last week at 32-month lows against the yen at ¥113.58 - down ¥4 on the week - as investors expected Japan to hold off from intervening in currency markets in a bid to head off expected criticism by other G7 countries. The dollar's weakness also helped the euro reach six-week highs of $1.1377 and sterling touch a two-month peak of $1.6363. "It will be open season on the dollar, particularly against the Asia-bloc," said Alex Schuman, strategist at Commonwealth Bank of Australia. He said the G7 communiqué represented a victory for John Snow, the US Treasury secretary, who has urged Asian countries to move away from managed exchange rates. China operates a fixed-currency peg to the dollar, widely believed to undervalue its currency by at least 20 per cent and Japan has spent at least ¥9,000bn ($75bn) this year intervening in markets to try to prevent the appreciation of the yen. South Korea and Taiwan also regularly intervene to help their exporters. Criticism of Asian currency policy, particularly by Japan and China, has increased. European officials have complained Asian manipulation has forced the euro to bear the brunt of dollar weakness. At its lifetime high at $1.193 in May, the euro had risen 20 per cent in a year, prompting complaints from eurozone manufacturers. The yen was 5 per cent stronger over the same period. "The important fact here is that currencies moved back on to the G7 agenda at all," said Simon Derrick, currency strategist at Bank of New York. "If they had been more explicit and criticised Asian exchange rates directly, we could have walked in to chaos, perhaps seeing the dollar ¥10, ¥12 lower." But few expect Japan to stop manipulating the market. Japanese officials said they saw no change in the G7's stance on exchange rates, and they would continue monitoring the market. "Asian central banks won't stop intervening altogether, but they won't be trying to push the rate aggressively higher," said Mansoor Mohi-uddin chief foreign exchange strategist at UBS. Mr Derrick said a steady move in the yen was essential to give Japan's exporters time to adjust. news.ft.com