Ramsey
07-07-2002, Sun 11:39 PM
Published: Sunday, July 7, 2002
Weaker dollar a plus for some
By Eileen Alt Powell
Associated Press
(الترجمة الفورية) (http://www.almisbar.com/scripts/ata/urltrs.dll?lang=arb&atatheme=0&options=abbr&options=translit&urlTarget=http%3A%2F%2Fwww.dailynews.com%2Fbusines s%2Farticles%2F0702%2F07%2Fbiz02.asp)
NEW YORK -- After five years of high flying, the dollar has begun weakening. That's not necessarily bad news for the U.S. economy.
To be sure, American travelers will pay more for hotels and souvenirs when they travel overseas. And foreign investors -- hit by the double whammy of depreciating dollars and corporate accounting scandals -- have begun pulling their money out of U.S. markets.
At home, however, a lot of people stand to benefit from a weaker greenback.
"The biggest gains will be for U.S. industries and workers that compete internationally," said C. Fred Bergsten, director of the Institute for International Economics in Washington, D.C. "So will exporters and the firms that make products that compete with imports."
That's because the weaker dollar will make U.S. goods less expensive abroad, stimulating sales. And it will make imports more expensive, improving the competitiveness of American-made goods.
A weaker dollar also will benefit companies that earn money overseas. Their profits in euros or yen will buy more dollars and translate to improved earnings statements back home.
Why is this happening now?
Experts point to the U.S. trade deficit, which grew to nearly $350 billion last year -- a level that can be sustained only if the United States continues to draw investment capital from the rest of the world to finance it. But low interest rates and the slumping stock market have made American investments less attractive.
Bergsten said the dollar has fallen 5 percent over the past five months on a trade-weighted basis, which factors in the value of the currencies of major U.S. trading partners. He believes it could drop 20 percent before it stabilizes.
The National Association of Manufacturers has been complaining for months that the dollar was inordinately strong. The Washington-based industrial trade group estimates the strong dollar cost the U.S. economy $140 billion in lost exports and 500,000 lost manufacturing jobs over the past year and a half.
Frank Vargo, NAM's vice president for international economic affairs, believes that one reason the dollar dominated other currencies for so long was the U.S. Treasury's "strong dollar" policy.
"People took this to mean that the administration was happy with the dollar as strong as it was and would intervene (in the currency markets) to keep the dollar where it was," Vargo said.
He noted that after Treasury Secretary Paul O'Neill told a Senate committee in early May that the market should set the value of the American currency, "traders picked up on that and the dollar moved downward."
Depreciation of the dollar in the past has resulted in inflation. That's because imported goods become more expensive, and domestic producers have the incentive to raise their prices, too.
Vargo doesn't think that will happen now.
"We have so much excess factory capacity, and there's high productivity growth in the United States," Vargo said of factors that mitigate inflation. "This is a good time for the dollar to come down."
Edward Yardeni, chief investment strategist at Prudential Securities in New York, said some of the current dollar weakness reflects lower sales of corporate bonds and other investments to foreigners this year than last.
"In addition, the corporate accounting and governance crisis has made foreigners very suspect about buying U.S. equities and U.S. bonds," Yardeni said. "And foreign companies aren't jumping to buy U.S. companies when they don't trust the balance sheets and income statements."
Yardeni said "a major negative" was the impact on the stock market.
"The most aggressive sellers are foreign investors," he said. "The sharp drop in stock prices could feed back and hurt the economy."
المصدر (http://www.dailynews.com/business/articles/0702/07/biz02.asp)
Weaker dollar a plus for some
By Eileen Alt Powell
Associated Press
(الترجمة الفورية) (http://www.almisbar.com/scripts/ata/urltrs.dll?lang=arb&atatheme=0&options=abbr&options=translit&urlTarget=http%3A%2F%2Fwww.dailynews.com%2Fbusines s%2Farticles%2F0702%2F07%2Fbiz02.asp)
NEW YORK -- After five years of high flying, the dollar has begun weakening. That's not necessarily bad news for the U.S. economy.
To be sure, American travelers will pay more for hotels and souvenirs when they travel overseas. And foreign investors -- hit by the double whammy of depreciating dollars and corporate accounting scandals -- have begun pulling their money out of U.S. markets.
At home, however, a lot of people stand to benefit from a weaker greenback.
"The biggest gains will be for U.S. industries and workers that compete internationally," said C. Fred Bergsten, director of the Institute for International Economics in Washington, D.C. "So will exporters and the firms that make products that compete with imports."
That's because the weaker dollar will make U.S. goods less expensive abroad, stimulating sales. And it will make imports more expensive, improving the competitiveness of American-made goods.
A weaker dollar also will benefit companies that earn money overseas. Their profits in euros or yen will buy more dollars and translate to improved earnings statements back home.
Why is this happening now?
Experts point to the U.S. trade deficit, which grew to nearly $350 billion last year -- a level that can be sustained only if the United States continues to draw investment capital from the rest of the world to finance it. But low interest rates and the slumping stock market have made American investments less attractive.
Bergsten said the dollar has fallen 5 percent over the past five months on a trade-weighted basis, which factors in the value of the currencies of major U.S. trading partners. He believes it could drop 20 percent before it stabilizes.
The National Association of Manufacturers has been complaining for months that the dollar was inordinately strong. The Washington-based industrial trade group estimates the strong dollar cost the U.S. economy $140 billion in lost exports and 500,000 lost manufacturing jobs over the past year and a half.
Frank Vargo, NAM's vice president for international economic affairs, believes that one reason the dollar dominated other currencies for so long was the U.S. Treasury's "strong dollar" policy.
"People took this to mean that the administration was happy with the dollar as strong as it was and would intervene (in the currency markets) to keep the dollar where it was," Vargo said.
He noted that after Treasury Secretary Paul O'Neill told a Senate committee in early May that the market should set the value of the American currency, "traders picked up on that and the dollar moved downward."
Depreciation of the dollar in the past has resulted in inflation. That's because imported goods become more expensive, and domestic producers have the incentive to raise their prices, too.
Vargo doesn't think that will happen now.
"We have so much excess factory capacity, and there's high productivity growth in the United States," Vargo said of factors that mitigate inflation. "This is a good time for the dollar to come down."
Edward Yardeni, chief investment strategist at Prudential Securities in New York, said some of the current dollar weakness reflects lower sales of corporate bonds and other investments to foreigners this year than last.
"In addition, the corporate accounting and governance crisis has made foreigners very suspect about buying U.S. equities and U.S. bonds," Yardeni said. "And foreign companies aren't jumping to buy U.S. companies when they don't trust the balance sheets and income statements."
Yardeni said "a major negative" was the impact on the stock market.
"The most aggressive sellers are foreign investors," he said. "The sharp drop in stock prices could feed back and hurt the economy."
المصدر (http://www.dailynews.com/business/articles/0702/07/biz02.asp)