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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (48482)	5/11/2005 11:02:30 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

Despite recording the highest oil imports since November of 2004, US Trade Balance deficit narrowed materially in March to -$55 Billion from an expected gap of $-61 Billion. The deficit declined by more than 9% as imports declined by 2.5% - the biggest drop in four years while exports of consumer and capital good rose. Lower dollar, which makes US manufacturers more completive along with dampened demand from US consumers may be finally having an effect on reducing the US Trade deficit which has ballooned to record highs in recent months. March' s reading is the lowest result since September of 2004, but still puts the Trade Balance deficit at a -$650 Billion yearly pace. The deficit with China shark marginally to- $12.9 Billion from $13.9 Billion, but several analysts attributed the narrower number to celebrations of Chinese Lunar New Year which may have slowed production somewhat. Chinese FX policy which keeps the yuan pegged to the dollar has been under heavy criticism from US Administration, but it is uncertain how much contribution to the reduction of the deficit a loosening of that peg would make. According to Bloomberg a confidential report provided to US lawmakers, noted last week that the dollar would need to depreciate by as much as 25% in order to have a meaningful impact of reducing the Trade Deficit. So far the dollar has declined approximately 6% on a trade weighted basis. The EUR/USD reacted sharply to the news, trading back to the 1.2800 level, but while the Trade Balance was certainly good news for dollar bulls, tomorrow’s Retail Sales number will be far more important to gauging the health of US economy. US Balance Sheet position still remains precariously weak and only evidence of strong economic growth could sustain a further dollar rally. dailyfx.com