The dollar continues to drop. Traders still site the current account deficit as the primary reason for the dollars decline. This is not a problem that Washington can easily fix, which implies it will be with us for awhile, continuing to depress the dollars vallue across the board. In addition, this problem is not politically sexy: it is a complex policy issue that does not easily condense to talking points. Translation: expect little, if nothing to happen.
The story below quotes a Japanese press report stating the Bush government is willing to accept a weaker dollar to correct the trade deficit. In theory this makes sense because a weaker dollar does make US goods cheaper to foreign partners.
But if this is administration's only strategy, we are in trouble. The US is a consumer's paradise that imports 50 billion more than it exports on a monthly basis. US manufacturers have lost over 2 million jobs under Bush. While productivity gains and the recession account for some of these losses, an additional amount of these jobs evaporated because the goods were either manufactured elsewhere or stopped manufacturing altogether. The remaining businesses must sell a vastly increased amount of goods for the cheap dollar policy to work.
NEW YORK (Reuters) - The dollar sank across the board on Friday as dealers shrugged off robust U.S. economic data and kept their focus on the currency's shaky fundamentals.
Given a burgeoning U.S. current account deficit -- broadly a measure of the country's global trade, analysts say it is difficult not to bet against the greenback.
"The current account deficit is the mantra being chanted by dollar bears who are finding inner peace shorting the buck," said Andrew Busch, global FX strategist, at BMO Nesbitt Burns in Chicago.
"But that does not change the market's concerns about the U.S. current account deficit and the perceptions that U.S. officials view a weaker dollar as a means to correct that significant deficit," he added.
Beuzelin was referring to speculation this week in U.S. and Japanese media that the U.S. government will tolerate a weaker dollar.
The Nikkei Financial Daily reported on Friday that Washington was set to accept a weaker dollar to cushion the economic impact from tighter monetary and fiscal policies and reduce the current account deficit. That supported the yen after falling earlier in the session on weaker-than-expected economic growth in the July-September period.
http://story.news.yahoo.com/news?tmpl=story&cid=580&e=3&u=/nm/20041112/bs_nm/markets_for
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