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CNN Live At Daybreak
Turn of Fortunes: The Dollar's Value
Aired January 01, 2004 - 06:16 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: But once a bastion of strength, the greenback has lost value against almost all other major currencies.
CNN's Maggie Lake looks at what ails the dollar and a prognosis for this year.
(BEGIN VIDEOTAPE)
MAGGIE LAKE, CNN CORRESPONDENT (voice-over): In the 1990s, robust economic growth in the U.S. and a raging bull market in stocks created huge demand for dollar denominated assets. For many, U.S. markets were the only gain in town.
But that changed in 2003, the U.S. economy and stock market both climbed higher, but this time Europe and Japan kept pace, causing some investors to shun the dollar and look to their own shores for opportunity.
ROBERT HORMATS, GOLDMAN SACHS INTERNATIONAL: You see improved prospects in Europe, Japan and many other parts of the world. So you are saying to yourself, I should diversify. So European central banks, Asian central banks are diversifying more euros, fewer dollars, relatively speaking. Portfolio managers are diversifying.
LAKE: The Federal Reserve's policy of extremely low interest rates has also fueled a shift out of the dollar. International portfolio managers have little incentive to invest in the U.S. when Europe has a higher rate of return.
The dollar index, a broad measure of the currency's strength, recently hit a seven-year trough and the dollar is mired at record lows against Europe's single currency.
One might think U.S. officials would be alarmed. But analysts believe the Bush administration is willing to let the dollar weaken in order to boost U.S. growth and increase the competitiveness of U.S. companies.
MARC CHANDLER, HSBC: I would be surprised at a change in U.S. dollar policy this side of the election. As the dollar falls, it's providing some monetary stimulus for the economy. It's helping boost corporate earnings as they translate their foreign earnings into dollars.
LAKE: There is a downside, a declining dollar could make it difficult for the U.S. to attract enough international investments to fund its massive deficit. (on camera): But analysts say for now the U.S. will continue to follow a policy of benign neglect, giving traders a green light to sell dollars.
Maggie Lake, CNN, New York.
(END VIDEOTAPE)
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired January 1, 2004 - 06:16 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: But once a bastion of strength, the greenback has lost value against almost all other major currencies.
CNN's Maggie Lake looks at what ails the dollar and a prognosis for this year.
(BEGIN VIDEOTAPE)
MAGGIE LAKE, CNN CORRESPONDENT (voice-over): In the 1990s, robust economic growth in the U.S. and a raging bull market in stocks created huge demand for dollar denominated assets. For many, U.S. markets were the only gain in town.
But that changed in 2003, the U.S. economy and stock market both climbed higher, but this time Europe and Japan kept pace, causing some investors to shun the dollar and look to their own shores for opportunity.
ROBERT HORMATS, GOLDMAN SACHS INTERNATIONAL: You see improved prospects in Europe, Japan and many other parts of the world. So you are saying to yourself, I should diversify. So European central banks, Asian central banks are diversifying more euros, fewer dollars, relatively speaking. Portfolio managers are diversifying.
LAKE: The Federal Reserve's policy of extremely low interest rates has also fueled a shift out of the dollar. International portfolio managers have little incentive to invest in the U.S. when Europe has a higher rate of return.
The dollar index, a broad measure of the currency's strength, recently hit a seven-year trough and the dollar is mired at record lows against Europe's single currency.
One might think U.S. officials would be alarmed. But analysts believe the Bush administration is willing to let the dollar weaken in order to boost U.S. growth and increase the competitiveness of U.S. companies.
MARC CHANDLER, HSBC: I would be surprised at a change in U.S. dollar policy this side of the election. As the dollar falls, it's providing some monetary stimulus for the economy. It's helping boost corporate earnings as they translate their foreign earnings into dollars.
LAKE: There is a downside, a declining dollar could make it difficult for the U.S. to attract enough international investments to fund its massive deficit. (on camera): But analysts say for now the U.S. will continue to follow a policy of benign neglect, giving traders a green light to sell dollars.
Maggie Lake, CNN, New York.
(END VIDEOTAPE)
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
