Replies

I have strong doubts about the validity of this report. The BBC is not rated as a trustworthy source. I would be looking at the numbers in a different fashion. This means US products are increasing in cost to sell to Europeans, which means a hit in US trade with Europe. This has been a major goal of Germany and France for six months now. Both are suffering greatly and need a retreat from advancing Euro. Nothing in Europe has changed in the past 12 months...with both France and Germany still in a bad situation, and I don't see great changes in the US marketplace. So, I would be wondering what governments are involved in pushing the rate up or down...and what they spent to do this.

here is bloomberg's report on it

Dollar Poised for Weekly Gain, Gaining 3.5 Percent Versus Euro
Aug. 22 (Bloomberg) -- The dollar headed for its biggest weekly gain versus the euro in more than two years, adding 3.5 percent, on signs U.S. growth is accelerating as Europe's economy struggles to expand.

Demand for the dollar has pushed the currency up more than 9 percent since May 27, when it reached a record low of $1.1933. The increase has eased concern among some investors that the U.S. will struggle to attract enough money to finance the deficit in its current account, the broadest gauge of trade and investment.

``Sentiment has definitely shifted to the dollar,'' said Larry Brickman, a currency strategist in New York at Banc of America Securities LLC, one of the five most accurate forecasters of euro-dollar exchange rates last quarter among 52 companies surveyed by Bloomberg News. ``More and more money is flowing into the U.S. as the economy improves.''

Against the euro, the U.S. currency advanced to $1.0884 at 1:35 p.m. in New York from $1.0923 yesterday. The gain this week is the most since the five-days ended March 16, 2001, when it rose 3.9 percent. The dollar was at 117.64 yen, compared with 117.81 yesterday.

Banc of America Securities, as well as UBS AG, raised its forecast for the dollar this week. Brickman said the dollar would strengthen to $1.08 per euro in January, after ending the year at $1.09 per euro.

The dollar also rose as U.S. stocks rallied, sending the Dow Jones Industrial Average toward its seventh weekly gain in eight. The Dow reached a 14-month high on Tuesday.

``There's definitely money flowing in equities, which is giving the dollar'' a boost, Brickman said.

`Strong Side'

In the third and fourth quarters, the U.S. may grow at a 3.6 percent and 3.7 percent annual pace respectively, according to the median forecast of economists in a Bloomberg News survey. By contrast, the European Union said that growth in the euro region will be between zero and 0.4 percent in the third quarter and 0.2 percent to 0.6 percent in the fourth quarter.

The euro region's economy shrank in the second quarter as a stronger currency during the period sapped demand for European exports, a revised European Union report will probably show next month. France's economy shrank in the second quarter. Germany, Italy and the Netherlands are already in recession.

``A lot of the recent data has come in on the strong side, reinforcing expectations that the recovery is progressing and contributing to a more favorable fundamental backdrop for the dollar,'' said Robert Lynch, a currency strategist in New York at BNP Paribas SA. ``European data isn't helping. It contrasts quite sharply with the developments here in the U.S.''

The dollar may trade between $1.0750 and $1.1050 in coming days, Lynch said.

Improving Economy

The dollar's gain reflects ``the economy in the U.S., and I think if people stay optimistic then the dollar will strengthen'' further, said Ad Scheepbouwer, chief executive officer of Royal KPN NV, in a televised interview with Bloomberg News. The Dutch phone company has cut its workforce by a third in an effort to cut debt and revive profit.

More signs the U.S. economy is improving may come next week. A Commerce Department report on Tuesday will probably show that durable goods orders rose 0.9 percent in July, following a 2.6 percent gain in the previous month, according to the median forecast of economists surveyed by Bloomberg News.

On the same day, the Conference Board may say its index of consumer confidence rose to 79.9 in August from 76.6 in the prior month, according to the economists surveyed. Yesterday, the Federal Reserve Bank of Philadelphia said its index of regional manufacturing grew at the fastest pace in more than five years.

Foreign Investment

The U.S. is also attracting money into its bond markets. Foreign central bank holdings of Treasury and agency securities in accounts at the Fed rose by a daily average of $6.4 billion in the week ended yesterday to $946.2 billion. Foreign holdings of Treasury securities totaled $760.5 billion. Holdings of agency securities totaled $185.7 billion.

The U.S. needs to attract about $1.5 billion a day to sustain the dollar's value.

The euro's drop against the dollar may extend to $1.0760, said David Toth, a technical analyst at the securities unit of UBS AG, the largest trader in the $1.2 trillion a day currency market. His forecast is based on the currency's Fibonacci progression level, which tracks prices to identify trends.

``If the euro breaks through $1.0760, we may see it go down to $1.05,'' said Toth, who is based in Chicago.

The pick up in growth in the U.S. may force the Federal Reserve to raise its target for overnight loans between banks in March for the first time in almost three years, according to interest-rate futures contracts.

`Turning Around'

The yen is headed for its biggest increase against the euro since the week ended May 25, 2001. It has gained 4.9 percent against the euro this week, and was recently trading at 128.00 per euro from 128.69.

Japan's currency is also set for its widest gain in almost four months against the dollar on prospects for economic growth, and a rally in the Nikkei 225 Stock Average, which has risen more than 20 percent in 2003.

``There's a general perception that things are turning around a little bit in Japan,'' said Bill Bertha, manager of foreign exchange trading in Pittsburgh at Mellon Financial Corp., which manages more than $100 billion of assets. ``The Nikkei and the economy are doing better, and that has helped the yen.

Last Updated: August 22, 2003 13:42 EDT

As you indicate, there are two sides to the "dollar strength" statistics. When the NY Post article in my #4 was originally posted here on FR, replies were 50/50 that a weak dollar was a good thing. We will now likely see on this thread a similar breakdown of pros/cons.

The underlying truth to the matter is that fluctuations over the long term have very little significance. Stability is the ideal, but neither side should scream bloody murder or claim success when the chips fall where they may.