- The dollar remained under pressure on Wednesday despite
attempts by John Snow, US Treasury secretary, (pictured) to clarify his
remarks late on Tuesday which had caused a sharp drop in the currency.
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- The dollar hit new four-year lows against the euro early
in the European trading session, with the European currency rising above
$1.10 for the first time since 1999. It recovered only slightly after Mr
Snow later reiterated the administration's strong dollar policy.
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- The dollar had started falling late on Tuesday after
Mr Snow said he was "not particularly concerned" about the recent
slide in the dollar against most other large currencies. "It's within
normal ranges," he said. "I don't see anything troubling about
it."
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- At the ceremony to provide his signature for the new
dollar banknotes on Wednesday, Mr Snow said: "Let me reiterate my
support again for the strong dollar."
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- Analysts said the nature of Mr Snow's comments on Tuesday
- made in unscripted responses to reporters' questions following a congressional
committee hearing - were an odd way to announce a softening of the dollar
policy, suggesting a gaffe rather than a deliberate hint.
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- Paul O'Neill, Mr Snow's predecessor, repeatedly caused
volatility in the foreign exchange markets by attempting to explain the
dollar policy and challenging the notion that the currency was overvalued.
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- But analysts said the damage had been done, with some
investors believing the US administration privately wanted a weaker currency.
"This statement will give a green light to the market to continue
selling the dollar," said Avinash Persaud, head of global research
at the investment bank State Street. "Whether true or not, it risks
raising suspicions that the administration is keen on a weaker dollar."
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- The dollar has been under pressure recently, falling
more than 8 per cent in three months against the euro, with investors citing
geopolitical risks and fears about the strength of the US economy.
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- On Wednesday, the Federal Reserve's latest "beige
book" assessment of grass-roots economic conditions showed a still
sluggish economy. Higher energy prices were having "wide-ranging economic
impacts throughout the country," the report said.
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- Robert Rubin and Larry Summers, the former US Treasury
secretaries who invented the rhetoric of a strong dollar policy, almost
never publicly commented on the current values of the currency, confining
themselves to repeating the mantra that a strong dollar was in the national
interest.
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- Analysts said that Mr Snow's comments risked turning
the dollar's decline into a rout. "Such a candid indication of benign
neglect risks turning a steady fall into a more destabilising slide,"
said Michael Lewis, senior currency strategist at Deutsche Bank.
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- Additional reporting Peronet Despeignes
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- http://news.ft.com/servlet/ContentServer?pagename=FT.com/
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