DLR'sCock
11-18-2004, 06:19 PM
http://www.guardian.co.uk/business/story/0,,1353645,00.html
Dollar Melts but Snow Stays Firm
Ashley Seager
The Guardian
Thursday 18 November 2004
We will not intervene, insists U.S. treasury chief.
The dollar plunged to an all-time low against the euro yesterday as the Bush administration signalled it was not prepared to take any action to prevent the slide.
The greenback has resumed its fall since George Bush was re-elected and is down 40% against the euro over the past two years, reflecting growing concerns in currency markets over the giant US budget and current account deficits.
But US treasury secretary John Snow told the Royal Institute of International Affairs that his country's current account deficit was a problem for other nations as well and signalled his opposition to any kind of intervention to put a floor under the currency.
"The issue of the current account deficit is a shared responsibility not just one for the US," he said.
He added that the US intended to do its bit to eradicate the current account deficit by reducing its budget deficit over the next few years. Other countries, particularly in Europe, had to make a contribution by boosting their economies and attracting invest ment capital which is now flowing into the US and exacerbating its current account problem. "We would be interested in seeing Europe grow faster ... There is unbalanced growth which is contributing to this problem of current account deficits," he said.
As he spoke, the dollar bust through the $1.30 to the euro level to set a record low of $1.3047. It also set a nine-year low against a basket of major currencies and a seven-month low of 104.1 against the yen. The pound rose to $1.8628.
But Mr Snow dismissed speculation that the major economic powers may intervene in currency markets and buy dollars: "The history of efforts to impose non-market values on currencies is at best unrewarding ... we believe in open, free, competitive currency markets."
But in spite of questioning he reiterated that Washington's long-stated policy of wanting a strong dollar remained intact: "The policy is the policy."
However, currency markets believe that Washington is happy to see the dollar fall back and help reduce the current account deficit by making imports more expensive and exports cheaper, so they took his comments as a signal to sell the dollar. "He gave no impression that dollar policy will change and that gave a green light to dollar sales," said Tim Fox, currency strategist at National Australia Bank in London.
Mr Snow said he was optimistic that China would soon free up the renminbi, which Beijing pegs at an artificially low rate to the dollar to boost its own exports. It runs a huge current account surplus with the US and freeing up its currency is seen as a way to reducing the US deficit.
Mr Snow said he was "very optimistic" that China would float its currency in the next few years, but did not specify a date. "They have agreed to do it but say they need a little more time. We are saying 'let's get on with it'."
Chinese officials are likely to come under more pressure to revalue the renminbi at a meeting of the Group of 20 leading industrialised and developing countries this weekend.
Mr Snow said that with China and India becoming so much more significant, dialogue about economic issues needed to be widened beyond traditional meetings of the G7 industrialised nations.
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Jump to TO Features for Friday November 19, 2004
Dollar Melts but Snow Stays Firm
Ashley Seager
The Guardian
Thursday 18 November 2004
We will not intervene, insists U.S. treasury chief.
The dollar plunged to an all-time low against the euro yesterday as the Bush administration signalled it was not prepared to take any action to prevent the slide.
The greenback has resumed its fall since George Bush was re-elected and is down 40% against the euro over the past two years, reflecting growing concerns in currency markets over the giant US budget and current account deficits.
But US treasury secretary John Snow told the Royal Institute of International Affairs that his country's current account deficit was a problem for other nations as well and signalled his opposition to any kind of intervention to put a floor under the currency.
"The issue of the current account deficit is a shared responsibility not just one for the US," he said.
He added that the US intended to do its bit to eradicate the current account deficit by reducing its budget deficit over the next few years. Other countries, particularly in Europe, had to make a contribution by boosting their economies and attracting invest ment capital which is now flowing into the US and exacerbating its current account problem. "We would be interested in seeing Europe grow faster ... There is unbalanced growth which is contributing to this problem of current account deficits," he said.
As he spoke, the dollar bust through the $1.30 to the euro level to set a record low of $1.3047. It also set a nine-year low against a basket of major currencies and a seven-month low of 104.1 against the yen. The pound rose to $1.8628.
But Mr Snow dismissed speculation that the major economic powers may intervene in currency markets and buy dollars: "The history of efforts to impose non-market values on currencies is at best unrewarding ... we believe in open, free, competitive currency markets."
But in spite of questioning he reiterated that Washington's long-stated policy of wanting a strong dollar remained intact: "The policy is the policy."
However, currency markets believe that Washington is happy to see the dollar fall back and help reduce the current account deficit by making imports more expensive and exports cheaper, so they took his comments as a signal to sell the dollar. "He gave no impression that dollar policy will change and that gave a green light to dollar sales," said Tim Fox, currency strategist at National Australia Bank in London.
Mr Snow said he was optimistic that China would soon free up the renminbi, which Beijing pegs at an artificially low rate to the dollar to boost its own exports. It runs a huge current account surplus with the US and freeing up its currency is seen as a way to reducing the US deficit.
Mr Snow said he was "very optimistic" that China would float its currency in the next few years, but did not specify a date. "They have agreed to do it but say they need a little more time. We are saying 'let's get on with it'."
Chinese officials are likely to come under more pressure to revalue the renminbi at a meeting of the Group of 20 leading industrialised and developing countries this weekend.
Mr Snow said that with China and India becoming so much more significant, dialogue about economic issues needed to be widened beyond traditional meetings of the G7 industrialised nations.
-------
Jump to TO Features for Friday November 19, 2004