Dollar Falls

Foreign Interest Appears to Flag as Dollar Falls:

"There is an emerging consensus that banks around the world are moving to expand their reserves of euros at the expense of dollars," said Laidi Ashraf, chief currency analyst at MG Financial Group in New York.

The Bush administration has essentially condoned the dollar"s decline. At meetings with foreign ministers last week, the Treasury secretary, John W. Snow, repeated the American mantra of support for a "strong dollar" but also for letting "market forces" determine exchange rates.

A continued decline of the dollar would be good for American manufacturers, because it would make exports cheaper in foreign markets and push up the cost of imports.

But a diminished foreign appetite for dollars could push up interest rates. The Federal Reserve has already raised short-term rates four times this year, but the shift in the sentiment of foreign investors may soon seriously affect long-term rates that influence the cost of home mortgages.

"Sell U.S., buy Europe," summed up Richard Berner, chief United States economist at Morgan Stanley, in a report last week. Mr. Berner noted that investors have begun demanding higher yields for 10-year Treasury securities than for comparable European bonds, and he predicted that the spread would widen."

Yeah, well, I've been expecting the dollar to fall for a long time. I put a large proportion of my little nest egg into foreign mutual funds months ago.