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Currencies

By Anne D. Picker, International Economist, Econoday     Monday, September 2, 2002

Currencies
The dollar fell against the euro, pound sterling and yen last week. The dollar was affected in part by thin markets. Traders traditionally take vacation during the waning days of summer, and trading can be marked by increased volatility. In addition, last Monday was a British holiday while this coming Monday is a holiday in the United States and Canada. Fears of potential U.S. Mideast military intervention in Iraq continues to impact currency trading, creating an aura of underlying anxiety. Analysts said U.S. asset markets have absorbed substantial negative corporate news and mixed U.S. economic data of late. But traders still are not focusing on the weaker-than-expected European data that continues to emerge. Rather they continue to focus myopically on all things U.S. - especially if it is negative. The dollar did recoup some ground on Friday when better-than-expected manufacturing data were released, easing fears of even slower U.S. growth than the 1.1 percent level of the second quarter.

The yen continued to rise despite anguished pleas that economic conditions do not warrant a stronger currency. A stronger yen has an adverse impact on exports, making them more expensive in the United States and elsewhere. This has a direct impact on profits of major exporters such as electronics firms and auto manufacturers.

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