Euro Zone Plans Currency Defense

[banana republican]

Finance ministers from the euro zone are expected today to agree to continue their effort to talk down the euro amid concerns the currency's renewed strengthening could stifle a fledgling economic recovery.

The regular monthly meeting will be critical in coming up with a common position on the euro's rise against the dollar ahead of a European tour by U.S. Treasury Secretary John Snow and a meeting of finance ministers from the Group of 20 leading industrial and emerging-market economies.

European officials in recent days have continued to denounce the recent sharp climb in the euro against the dollar. "Brutal changes in exchange rates are not welcome," said European Central Bank executive-board member Gertrude Tumpel-Gugerell -- a reiteration of ECB President Jean-Claude Trichet's comments last week that kicked off the latest round of verbal intervention.

In addition, officials have kept up their critique of what they perceive as the main reason behind the strong euro and weak dollar: large U.S. budget deficits. Mr. Snow, however, said Europeans' complaining about the impact of a weakening U.S. dollar should foster economic growth by lowering tax rates and creating more open labor markets.

http://online.wsj.com/article/0,,SB110046768874073490,00.html?mod=home%5Fwhats%5Fnews%5Fus

[Polemicist]

1. We soak up 80% of the world's savings....

To pay for our huge Federal budget deficits and our current accounts (trade) deficit. These together are over a trillion dollars a year. How long will China and Japan keep lending us the money to purchase their toys and cars?

We are exporting America's prosperity and financing this by debasing our nation's currency. How do we stop the madness, when the architect of our economic folly has been re-elected?

[banana republican]

2. speaking of asia

The dollar's recent bout of persistent weakness, despite the strong fundamentals of the U.S. economy and Fed tightening, reflects a decision by foreign central banks, especially those in Asia, to reduce their dollar buying and subsequent accommodation of a rising U.S. current account deficit through purchases of U.S. Treasury securities. In the weeks following Oct. 1, foreign central bank holdings of treasuries have risen by just $9 billion. That amounts to an annual rate of $95 billion, still substantial, but far below the U.S. annualized $600 billion current account deficit. Some of the reduced purchases of U.S. government and agency securities may reflect a decision to keep intervening in currency markets while diversifying accumulated reserves into other currencies, like euros, instead of buying U.S. Treasury bills or notes or agency paper. Either way, the dollar falls.

http://online.wsj.com/article/0,,SB110047413593773649,00.html?mod=opinion%5Fmain%5Fcommentaries