- The dollar has fallen to a new record low against the
euro after data fuelled new concerns about the US economy.
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- The greenback hit $1.3502 against the euro in dealings
in New York.
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- The dollar has weakened sharply since September when
it traded about $1.20, amid continuing worries over the levels of the US
trade and budget deficits.
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- Meanwhile, France's finance minister has said the world
faced "economic catastrophe" unless the US worked with Europe
and Asia on currency controls.
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- Herve Gaymard said he would seek action on the issue
at the next meeting of G7 countries in February.
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- Ministers from European and Asian governments have recently
called on the US to strengthen the dollar, saying the excessively high
value of the euro was starting to hurt their export-driven economies.
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- "It's absolutely essential that at the meeting of
the G7 our American friends understand that we need coordinated management
at the world level," said Mr Gaymard.
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- Market forces
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- Thursday's new low for the dollar came after data was
released showing year-on-year sales of new homes in the US had fallen 12%
in November - with some analysts saying this could indicate problems ahead
for consumer activity.
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- Commerce Department data also showed consumer spending
- which drives two thirds of the US economy - grew just 0.2% last month.
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- The figure was weaker than forecast - and fell short
of the 0.8% rise in October.
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- The official US policy is that it supports a strong dollar
but many market observers believe it is happy to let the dollar fall because
of the boost to its exporters.
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- Further to fall
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- The US government has faced pressure from exporters organisations
which have publicly stated the currency still has further to fall from
"abnormal and dangerous heights" set in 2002.
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- The US says it will let market forces determine the dollar's
strength rather than intervene directly.
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- Statements from President Bush in recent weeks highlighting
his aim to cut the twin US deficits have prompted slight upturns in the
currency.
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- However, the underlying trend remains downwards.
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- The dollar has now fallen for a third consecutive year
and analysts are forecasting a further, albeit less dramatic weakening,
in 2005.
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- "I can see it finishing the year around $1.35 and
we can see that it's going to be a steady track upward for the euro/dollar
in 2005, finishing the year around $1.40," said Adrian Hughes, currency
strategist with HSBC in London.
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- © BBC MMIV
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- http://news.bbc.co.uk/2/hi/business/4121555.stm
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