NYTimes.com Article: Dollar Falls to 4-Year Low Against Euro (fwd)

Pres. Bush flies off to an aircraft carrier in the Pacific in order to not
declare victory.  Meanwhile, the dollar continues its triumphal march as
the currency of Empire.

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Dollar Falls to 4-Year Low Against Euro

May 1, 2003
By ERIC PFANNER
International Herald Tribune






The dollar tumbled to a four-year low against the euro
today, as weak economic data, low American interest rates
and the growing federal budget deficit encouraged
foreign-exchange traders to continue seeking
higher-yielding currencies elsewhere in the world.

The euro traded as high as $1.1284 today, up from $1.1179
late Wednesday. In late trading this afternoon, the euro
was quoted at $1.1232, putting it within 5 cents of its
initial value of $1.17 when it was introduced in January
1999 as the single currency for 12 of the 15 members of the
European Union. Since then, it has consistently traded
below that level, dropping as low as 82.3 cents in October
2000.

But since last year, the euro rebounded, sending the dollar
sharply lower. This week alone, the dollar has dropped
about 2.5 percent.

The United States requires about $1.5 billion a day in new
capital from overseas just to keep the dollar from falling
because of a huge imbalance between American imports and
exports of goods and services. Yet the net inflow of
foreign money invested in American securities fell to
roughly half that level in February, the lowest rate in a
year, according to the United States Treasury.

"Foreigners appear to be questioning the relative
attractiveness of U.S. assets," said Rebecca McCaughrin, an
economist at Morgan Stanley.

Analysts say there are several reasons why global
investors, who poured money into the United States during
the market bubble years, are getting nervous.

After a series of scandals over corporate accounting and
brokerage firms' practices, trust in American financial
markets remains shaky, some analysts say.

American interest rates, pushed aggressively lower by the
Federal Reserve in an effort to stimulate economic growth,
are far below European levels, reducing the appeal of
United States bonds. Foreigners in February sold a net $5
billion of Treasury securities and $8.6 billion in
securities issued by United States government agencies.

Analysts say central banks around the world are also
starting to shift a greater portion of their reserves into
euros and out of dollars. And the American economy, while
likely to outperform the European single currency zone this
year, may not do so by a great enough margin to offset
other negatives.

Given those ankle weights, the United States current
account deficit of nearly $600 billion now looks to many
investors like a heavy burden.

"The argument that the dollar should be strong because U.S.
policymakers are more flexible and growth-oriented than
their European or Japanese counterparts does not make
sense," said Alex Patelis, currency strategist at Merrill
Lynch. "It is not a matter of growth."

Even if, as other analysts maintain, economic performance
is the fundamental factor driving the currency markets, the
latest numbers do not make an attractive advertisement for
the dollar. A report today showed that activity among
American corporate purchasing managers was surprisingly
feeble in April, culminating a week of data suggesting that
economic growth in the United States may not be much above
the 1 percent expected in the euro zone this year.

http://www.nytimes.com/2003/05/01/business/worldbusiness/01CND-DOLLAR.html?ex=1052849456&ei=1&en=6a540edc232c2cd0



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