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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: TideGlider who wrote (662365)	11/24/2004 10:31:45 AM
From: Hope Praytochange	Read Replies (1) \| Respond to of 769667

Weak Dollar Rules - By Carol Hurley The Bush administration's clear victory in the U.S. Presidential election, followed by a huge increase in the Bureau of Labor Statistics' October non-farm payrolls report was the spark needed to push several futures markets into a euphoric state. Uncertainty removed, the markets finally were able to focus on probable "known policies" and mandates affecting the current account deficit, budget deficit, deficit spending for the continued war on terrorism, permanent tax cuts, Social Security reform and a free market system. The translation, of course, sealed a new leg down for the U.S. Dollar Index, which in turn sparked new contract highs for the Euro Currency, Swiss Franc, Canadian Dollar and Gold (just to mention a few). The Bond market sold off after the solid upward revisions for the August and September payroll figures were released. If the dollar slide continues, the Treasury markets may be vulnerable to further sell-offs. Traders will be monitoring foreign central bank purchases of U.S. debt each month to see if the weak dollar begins to have an effect on those purchases. Needless to say, several markets are being driven by movement in the U.S. dollar. At least for the time being, traders view any comment from the White House regarding a strong dollar policy as rhetoric, because over the past four years, the Bush administration was more inclined to let market forces dictate fair value. Perception is also building that this administration secretly supports a weaker dollar, which would eventually cure the deficits, as U.S. exports increase and foreign products become too expensive. The most recent comments from foreign central banks have fluctuated from threats of action against "brutal moves in the foreign exchange markets" from European Central Bank (ECB) President Jean Claude Trichet, to indifference where certain ECB officials do not reflect concern about the falling dollar. In fact, some ECB officials appear to be reluctant towards intervention (for the moment) and more concerned with inflation. This is an about-face compared to their fierce outcries during the early part of this year when the euro was trading at the same current levels. One likely reason is that elevated prices in crude oil have been encroaching upon the European Union's (EU) economic growth. Crude oil prices are quoted in U.S. dollars -- meaning that, when the EU (or any other country for that matter) purchases crude oil, it must be paid for with U.S. dollars. It appears that the ECB's current stance is that a weaker dollar would help the EU offset the inflationary pressures sustained by the expensive crude prices we have seen over the past few years.