AUGUST 16 2001 Dollar falls as IMF warning fuels unease BY GARY DUNCAN, ECONOMICS CORRESPONDENT

THE dollar succumbed to deepening losses yesterday as selling pressure on the US currency intensified in the wake of an International Monetary Fund warning over its vulnerability.

The IMF’s comments stoked rising market unease over the American economy and the dollar’s value, fuelling a fresh sell-off that sent it tumbling across the board. The exposed US currency slumped more than 1 per cent against the euro, the pound, the yen and the Swiss franc as traders worldwide scrambled to sell.

The losses saw the previously embattled euro leaping higher. Breaking through key technical barriers, the single currency climbed as high as 91.17 cents, up 0.87 cents from Tuesday’s US close and marking a five-month low for the dollar.

The US currency has now shed more than 4 cents against the euro during the past six days alone, while falling more than 6.5 per cent from the 15-year overall highs against a basket of main currencies that it set in early July.

The dollar’s drop also saw it losing nearly 1.75 cents against the pound yesterday, pushing sterling to a three-month high of $1.4392. But sterling was left languishing against the resurgent euro, closing at 63.36p, up a little from a five-month low of 63.58p, equivalent to DM3.0764, set earlier in the day.

Yesterday’s dollar losses were accelerated by nervousness over rumours that Paul O’Neill, the US Treasury Secretary, would raise question marks over America’s strong-dollar policy in a television interview. Determined efforts by US Treasury officials to insist that the policy was unchanged failed to dispel uncertainty before Mr O’Neill later reaffirmed it in his broadcast.

Markets have been reassessing their view of the dollar since last week, when a gloomy assessment of US prospects in the Federal Reserve’s “Beige Book” dealt a blow to confidence.

Figures yesterday offered little relief. US industrial production fell 0.1 per cent in July — less than expected, but marking ten months of decline. With business sales also seeing the steepest fall for nine years, analysts said the data may see US second-quarter growth revised to show a decline, leaving the economy on the edge of recession.

-- Anonymous, August 15, 2001