Dog Days for the Dollar

The Minister for Finance of the USA, Paul O 'Neill, can now wish that it call his constitutional Law takes the fifth when it appeared before the committee of bank transactions of senate Wednesday. Silence in this case could have been of gold.

For the decade spent, the Ministers for Finance played a board game refined by giving testimony on Capitol Hill. With required to explain the policy towards the currency, the incantation was: Has strong dollar is good for the economy of the USA. Rester quiet face more with interrogation can have been mind-numbingly painful, but it helped the subsistence the speculators with the compartment.

The declaration that he did not want any to give the speculators ammunition , blunt-speaking M.O about 'Neill proceeded to give to the markets a gun charged.

The words of the politicians imported far less than the execution of the economies, it said. There I think 'true doubt of SA about the effectiveness of the interventions or words about the intervention.

Like report/ratio, it was hardly earth-shattering in its wisdom. But one took to him as signs that it diluted the administration of Bush the 'engagement of S to a strong dollar vis-a-vis the pressure of support of the manufacturers in the states of desindustrialized area fighting to compete with on the global markets.

In oneself, it was rather not only to cause a wave to sell that took the dollar on its lower level for six months against all the important currencies but also with the prompt speculation that its bullfight seven year old on the foreign currencies finished.

Gens starts to now see cracks in the strong policy of the dollar, which at least moderately returns them to the fall towards the dollar, Jeremy says Hawkins, from America bank in London. Paul O 'Neill 'testimony of S.A. proposed yesterday that him 's inherited this strong coat the dollar but the doesn 't want really to carry it.

To be right with M.O 'Neill, the market sought already another excuse to empty the dollar after five years turbulent leso� the currency was the sure asylum of the choice for the total investors. The answer to the Asian financial crisis of 1997? Buy the dollar. What made after the euro the 's less than the beginning of flutter in 1999? Charge upwards with dollars. Even the terrorist attacks of September 11 did not shake the faith of the markets.

Gerald Lyon, economist principal to the privileged standard, indicated that there were two principal banks with this approach. One or the other investors considered that who arrived at the economy of the USA the results would be worse elsewhere, or they had complete confidence as Alan Greenspan and answer of federal reservation 'of policy of S.

Like 's. changed A. it? If something, the USA seems to still exceed the rest of the world. 11 that interest rate cuts 2001 inside have meant that the deceleration of the economic activity was of short duration, with dissipated fears that on September 11 would deepen and would prolong the recession at the beginning caused by the boring of the bubble of stockmarket. The courses of actions gathered quickly in autumn in preparation for a bounceback of corporation of benefit.

But in addition something odd produced. In the first three months of 2002, there were a good number of news in an encouraging way about the economy of the USA and abundance of bad news about its principal business partners, Europe and Japan. However the dollar did not reinforce on the foreign currencies. It was in oneself a sign that it missed vapor. But in month spent, there were series of events which would in the past have proven the destabilization for the euro.

There was a strike in Italy, the Dutch government resigned, Germany 'union of the S largest, IG Metall, threatened to strike above the wages, and then of Europe amazed by Jean-Marie Le Pen 'at the political elite of S by demolishing Lionel Jospin in the first round of the French presidential elections.

Those which were with court of euro in preparation for a great sale made burn their fingers. Far from plunging towards its fall record of $0.8230 seen in autumn of 2000, it rose above $0.90 and seems carried in balance of going always higher. David Brown, economist European as a chief with Bear Stearns, indicated: There are two or three wire of release ahead for the euro, such as the second round of the French elections. But once Chirac is of return, him 's very clear so that the euro quickly trades the support with the parity against the dollar towards the end of the year.

Central Bank Europ�enne makes it clear already that it could put to the top of interest rate - but while such a movement two years ago would have had investors to pile up in the dollar, this time it can amplify the euro.

A central banker said recently that it was again with the businesses as usual in foreign currencies, with investors still concentrating on the output of interest rate on sale of the rival currencies rather than their respective potential growth. When the Canadian central bank raised interest rates last month, the Canadian dollar, which was on the floor for the major part of last year, started to show signs of life.

According to Mr. Brown, the retailers of foreign currencies see signs of a tighter monetary policy around the world, with two great exceptions: Japan, where lower Yen is the true weapon of government 'of S only against the permanent recession; and the USA, where the federal reservation is concerned that most of the re-establishment in the economy in the first quarter was simply caused by restocking and that one prolonged period of low interest rate will be necessary.

The execution of America of corporation justifies this attention. A company after another provided the disappointing figures of incomes these last months, and that was reflected in the weakness of the stockmarket. With Wall Street maintaining in the third year of a market of bear, the argument which the USA always provide of better returns does not convince any more. Instead of that, the attention turns to the basic principles of the economy of the USA, where the open balance dese payments overdrawn, maintaining 4% of the output and the rise, is the main cause of the concern.

The USA 'the attitude slackened by S towards the deficit met the international critic of support in recent weeks, with Wim Duisenberg, the president of Central Bank Europ�enne, more late to inform that increasing imbalances could destabilize the worldwide economy.

The federal reservation the 's has research proves that when an adverse balance dese payments striking 5% of output it always led to an abrupt decline in the currency. The other large incantation of the Ministers for Finance was that the basic principles of the economy of the USA are noise. M.O 'Neill repeated the magic formula Wednesday, but the illusion seems to have stopped work.

If the adverse balance dese payments continues to deteriorate atits current rate, towards the nearest end of the year the USA will have to suck in $1bn per day of the investors of to cover the deficit overseas. On the recent form, it is more probable the bubble of the dollar will burst initially.