Falling US dollar in 2004

Greenspan holds out little hope for dollar

By Edmund Conway

Last Updated: 12:33AM GMT 20 Nov 2004


The dollar hit a new all-time low against the euro yesterday as Alan Greenspan said there was little anyone could do to prevent it falling further.
The chairman of the US Federal Reserve warned the European Central Bank from intervening in the foreign exchange markets as he spoke in Frankfurt ahead of the meeting of the G20 industrialised and developing economies in Berlin this weekend.
"It seems persuasive that, given the size of the US current account deficit, a diminished appetite for adding to dollar balances must occur at some point," said Mr Greenspan, sending the Dow Jones plunging by over 100 points in afternoon trading. The dollar dropped almost three quarters of a cent against the euro to close in London at $1.3058.
Mr Greenspan said: "Current account imbalances, per se, need not be a problem, but cumulative deficits, which result in a marked decline of a country's net international investment position - as is occurring in the United States - raise more complex issues."
It is not the first time Mr Greenspan has raised concern over the US current account deficit, which amounts to 5.7pc of the country's annual output. However, he also echoed the US Treasury Secretary John Snow's warning earlier this week that he would not support central bank intervention against the falling dollar. He said intervention could have only a limited and short-term effect.
Mr Greenspan said the best action the Bush administration could take would be to cut its spending and reduce the budget deficit.
The dollar is expected to be one of the most heated topics for discussion at the meeting, since European policy-makers have complained that its weakness, and the euro's consequent expense, has hit exports and manufacturing.
Gordon Brown is expected to call for the International Monetary Fund to investigate and compare the fiscal positions of G20 members. The Chancellor is thought to believe this comparison would show the UK is well-placed compared to other major countries, despite recent criticisms about its fiscal position, and the Treasury's slimming chances of meeting his borrowing rules.



http://www.telegraph.co.uk/finance/2899997/Greenspan-holds-out-little-hope-for-dollar.html