[Orangedog]

PING

Thanks to Soren for showing me this one. I was going to highlight the most contradictory or innane statements by the G-7 big-shots, but there are so many that it would just be posting the entire text of the article. But anytime that Snow utters the words "strong dollar" it usually means the dollar is about to drop again.

[David]

"Because a weaker dollar helps U.S. exports by making American goods more attractive on global markets and may improve President Bush's chances for reelection, the United States was seen supporting a renewal of the September statement."

There isn't any real evidence that the cheaper dollar has had any material impact improving exports. To the extent the lower dollar limits imports by making them more expensive, I doubt that domestic consumers will view it as positive.

Why would any investor hold liqudity in the form of dollars at less than 1% when it could hold the same liquidity in Euro's or pounds at rates close to 3% with upside on the exchange rate?

Reason this pronouncement is likely to have adverse economic impact is that foreign exchange markets are likely to view it as a committment to continued declines in the value of the dollar which is likely to provide further incentives to convert dollar liquidity to other monetary assets.

[Soren]

I don't think it was me that showed you. I agree with you about the contradictions, particularly "close cooperation" and "strong dollar policy" versus "free markets" and 1% short term rates, but this is exactly what I expected. A bit of ambiguity to give political cover and keep the speculators guessing a bit. The US wants an orderly fall in the dollar, plain and simple. I don't think the ECB will lower in the near term. Just a guess really, based on their strong aversion to inflation. The bigger question in my mind is how much longer the Japanese are going intervene with the same level of intensity. If the USD continues its relatively linear descent, it will be near 75 by the election.