I'll keep this board posted concerning the value of the dollar against other currencies. The last week or so it has dropped precipitously against the euro and even the yen even though Japan is entering a deepening recession. What this means is that the further the dollar drops against other currencies the more likely international investors are going to start yanking there investments from the U.S. markets which will accelerate a drop in the stock market. This could be a mini-cycle or the start of a major long-term trend in which case our markets are going to be HAMMERED.

08/15 12:47 Dollar Falls to Five-Month Low as U.S. Recovery Not Yet Seen By Mark Tannenbaum

New York, Aug. 15 (Bloomberg) -- The dollar sank to a five- month low against the euro and to the weakest level in two months versus the yen on expectations U.S. reports this week will underscore that the world's biggest economy isn't recovering yet.

The U.S. currency fell as far as 91.40 cents per euro, the lowest point since 92.09 on March 14, from 90.32 yesterday. It then recovered to 91.21 cents. The dollar dropped to 119.24 yen, the weakest level since June 5, from 121.75. It fell to the lowest since March against the Swiss franc, and to the weakest since May against the British pound.

Investors ``are moving away from the U.S. right now,'' said Tim Mazanec, senior currency strategist at Investors Bank & Trust. ``The momentum is definitely on the side of a weaker dollar.''

Government reports tomorrow will probably show rising jobless claims, and declines in housing starts and Philadelphia-area manufacturing, according to Bloomberg News surveys.

The dollar's sixth day of losses versus the euro -- its longest losing streak this year -- was partly fueled by speculation the Bush administration will back off its strong- dollar policy.

Analysts tied the talk to a scheduled television appearance today by U.S. Treasury Secretary Paul O'Neill at about 2 p.m. New York time. Exporter complaints to the administration in recent weeks that the dollar's strength is a drag on earnings have made a change in U.S. dollar policy more plausible, say analysts.

``He's not expected to talk about dollar policy,'' said Treasury spokesman Rob Nichols. ``There's been zero change in dollar policy,'' he said.

Investor Skepticism

Still, some strategists said they're looking for O'Neill to repeat his stance that a strong dollar is in the U.S. interest.

The International Monetary Fund said yesterday that the U.S. current account deficit sets the dollar up for a drubbing. The report refocused traders' attention on the threat the trade gap poses if foreigners lose interest in U.S. investments.

``Anything less than crystal-clear support for the (strong- dollar) policy will be interpreted by a skeptical market as an implicit softening,'' said Shahab Jalinoos, a currency strategist at UBS Warburg in London, in a note to investors.

Last month, the dollar rose to a 15-year high against a basket of six major currencies, driven by expectations six Federal Reserve interest-rate cuts since the start of the year would spark a growth revival.

A strong dollar helps the economy by keeping imported inflation in check and contributing to lower interest rates. Yet it is a headwind for U.S. exporters, as it diminishes their overseas earnings.

-- Guy Daley (guydaley1@netzero.net), August 15, 2001

Answers

Guy, THANK YOU for the post and information. Will keep watching here to see what the US dollar value (or devaluation) does. suzy

-- suzy (its suzy 2@aol.com), August 15, 2001.

Breaking the greenback

As the US dollar comes under pressure, the performance of the US treasury secretary hardly inspires confidence, writes Mark Tran

Special report: global recession

Thursday August 16, 2001

The US treasury secretary, Paul O'Neill, picked his words as carefully as a man making his way through a swamp, when asked about the dollar yesterday. In a TV appearance eagerly anticipated by currency traders, Mr O'Neill gave little away by saying: "There is no upside in talking about the dollar except to say that we have a continuing policy."

The treasury secretary was right to be circumspect. Back in February, Mr O'Neill triggered a flight out of the US currency, when he told a German newspaper that the US was "not pursuing a strong dollar policy".

His statement to the Frankfurter Allgemeine Zeitung forced the US treasury to issue a statement that there had been any change to the strong dollar policy under President Bill Clinton.

The treasury, in effect, rapped its own boss's knuckles and Mr O'Neill came out of the episode compared unflatteringly with Robert Rubin, his silky smooth and sure-footed predecessor.

Ironically, Mr O'Neill, who once successfully ran Alcoa, the aluminium giant, would probably love to see a weaker dollar. As an old manufacturing boss, he knows how a strong dollar has hurt American manufacturing, especially now that the US economy is running out of steam. Big American exporters, such as General Motors, have been clamouring for the US to abandon its strong dollar policy, to boost their sales abroad.

But much as Mr O'Neill might want to talk down the dollar, he cannot take the risk of precipitating an uncontrolled plunge in the greenback. Currencies have a notorious tendency to overshoot, and any effort to lower the dollar could rapidly unravel in a financial system where billions can be shifted instantly by currency traders.

Wildly fluctuating currencies, especially the dollar, could cause havoc. If the dollar plunges uncontrollably, European and Japanese exporters could find their increasingly expensive goods priced out of the American market, a development that would undermine growth in those economies.

Britain faces a very similar problem, where manufacturing exports have been hurt by a strong pound. But the treasury and the Bank of England are similarly terrified that a depreciation of the pound would get out of control.

US officials have to tread particularly carefully as the dollar is under pressure anyway. The problem lies with the enormous size of the US current account deficit - the difference between what America buys from foreigners and what it sells to them.

That deficit has ballooned to $450bn (£312bn), prompting the International Monetary Fund to warn this week that the gap was unsustainable and threatened the dollar's stability. Worries about the dollar have already led to a strengthening of the euro, which has risen to highest level against the dollar in months.

As Paul Krugman, the US economist, pointed out recently in the International Herald Tribune, the US current account deficit stands at 4.5% of American gross domestic product. That percentage is a bigger share of the American economy than the deficits of Indonesia or South Korea on the eve of the 1997 Asian financial crisis.

He also points out that deficits that large have always led to a currency plunge. But Mr Krugman argues that a weaker dollar would benefit America as it would boost a flagging US economy.

Be that as it may, any effort to push down the dollar would have to be carefully managed. Judging from Mr O'Neill's performance so far, there is little to inspire confidence in his ability to handle complex international financial issues.

http://www.guardian.co.uk/business/story/0,3604,537926,00.html

-- Martin Thompson (mthom1927@aol.com), August 16, 2001.

Guy, a thank you from me as well for posting this. I am going to watch for info concerning the dollar. This is something that really concerns us in a big way and an issue that is overlooked by many because of all the other news going on around the world... We will be watching.

-- Tess (webwoman@iamit.com), August 20, 2001.