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To: macavity who wrote (54584)	10/21/2004 3:17:00 PM
From: elmatador	Respond to of 74559

Dollar slide sparks intervention speculation By Steve Johnson Published: October 21 2004 16:48 \| Last updated: October 21 2004 16:48 A further slide in the value of the US dollar on Thursday prompted fevered speculation of renewed government intervention in the currency markets. The talk came as the greenback tumbled to a fresh eight-month low in trade-weighted terms amid uncertainty over November's presidential elections and fears of an oil-induced slowdown in the US economy, which could undermine US equities and make it harder for the US to fund its vast $600bn a year trade deficit. Earlier this year the market was heavily distorted by government intervention as countries fought to keep their export sectors competitive. Japan's ministry of finance, via the Bank of Japan, spent Y20,000bn in 2003 and a further Y15,000bn in the first quarter of 2004 to avoid the dollar plunging towards the Y100 mark, arresting the slide at Y103.40 on April 1. Japan has washed its hands of intervention since March, even as China, South Korea, Thailand and Malaysia have continued to buy dollars, albeit at a more modest rate. But the dollar's renewed slide to within 2 per cent of its March lows has prompted talk that Japan, New Zealand and the eurozone may now be girding their loins to re-join the battle. The BoJ on Thursday contacted several major banks to ask who they were buying yen on behalf of - a possible prelude to renewed intervention. This followed comments from Sadakazu Tanigaki, the Japanese finance minister, and Koichi Hosokawa, vice finance minister, who both said they were monitoring movements in the currency markets. “The process begins with rhetoric, evolves into more aggressive rhetoric, then the BoJ checking rates and then actual intervention,” said Derek Halpenny, senior currency economist at Bank of Tokyo-Mitsubishi. However Mr Halpenny does not see actual intervention unless the yen approaches its April highs, with others seeing Y105 as the trigger point. Chris Towner, consultant at risk manager HIFX, said Japanese exporters were not currently under pressure, having hedged their dollar exposure at levels above Y110, lessening the need for the MoF to intervene. There is also a widespread perception that the Japanese, who elicited much US wrath for their tactics earlier in the year, would be reticent to intervene prior to the US presidential election. “Japanese intervention this close to the election would be a godsend for Kerry, who has stated he will take a much harder line on Asian FX intervention and manipulation,” said Aziz McMahon, curencies strategist at ABN Amro. Mark Cliffe, chief economist at ING Financial Markets, believes that ultimately “Asian central banks will prove just as ready to intervene” as earlier in the year, “once again leaving the euro as the line of least resistance”. Eurozone politicians protested about euro strength back in March when the euro approached $1.30, and will be keen to ensure the zone's tepid export-led recovery does not falter. The talk then was of possible ECB intervention at $1.35 and a rate cut at $1.40, although this was never tested with the euro topping out at $1.293. However, with oil and other commodity prices at highs, politicians may be more content with a stronger currency in order to keep inflation in check, a point made by French finance minister Nicolas Sarkozy.

To: macavity who wrote (54584)	10/22/2004 3:49:46 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

Macavity: Investors should expect further dollar depreciation. Oga, I sold Yen -the day before yesterday- for a profit and went back to the USD. I'm prepared to jump back to the Yen soon. High oil prices will sink the Yen. The next round of strike in Nigeria (slated for next week with undetermined end in sight) will raise oil further up (USD60 perhaps?) and, as a consequence, the Yen to fall against the USD then perhaps I should jump in again. Besides, Obasanjo is under frank destabilization and very likely won't see the end of his term. Cheers Elmat US dollar Published: October 21 2004 13:27 \| Last updated: October 21 2004 13:27 news.ft.com Has the US dollar embarked on a renewed downward trend? On Thursday the dollar's trade-weighted index fell to an eight-month low, with concerns over the US current account deficit firmly in focus. The deficit is 5.7 per cent of gross domestic product, and still growing. Economists estimate that a 20-25 per cent nominal dollar depreciation would be required to narrow the gap by 2 percentage points. While foreigners remain willing to finance the deficit the adjustment process may be postponed. However, with capital inflows declining, the US is increasingly dependent on foreign central banks for funding. Their appetite may be waning. For the first time since August 2003, the four-week moving average of US bond purchases by foreign central banks has turned negative. John Snow, US Treasury secretary, continues to pay lip service to a strong dollar. Comments on the deficit from Federal Reserve officials, however, have increased recently. Some have been explicit, saying the dollar is headed lower. IDEAglobal, the research group, suggests some Fed officials believe that delaying adjustment risks a disorderly dollar decline and favour “talking” the dollar lower. But Alan Greenspan, Fed chairman, does not favour this approach. The current account deficit is not a new problem. But it is growing, the willingness to fund it may be declining, and policymakers appear increasingly concerned. Investors should expect further dollar depreciation.