No support for the sagging dollar

A post-G7 statement has made no mention of US dollar weakness, effectively providing “a green light” to sell. Meanwhile, the dollar hit a record low against the euro.

So much for a concerted attempt by the G7 to shore up the sagging dollar. The post-gathering communiqu made no mention of dollar weakness, thereby effectively providing "a green light" to sell the greenback, says Sue Trinh of RBC Capital Markets.

While Treasury Secretary Hank Paulson again said that a strong dollar was in America's interest, the currency has hit a new record low of over $1.43 against the euro and an all-time low against a basket of America's major trading partners' currencies. The strong dollar policy is widely deemed an ignore-the-dollar' policy, as one analyst put it; Washington appears content with the dollar's slide as it boosts exports and helps reduce America's massive current-account deficit, still at around 6% of GDP. A darkening outlook for the US economy is also putting pressure on the dollar, as it presages lower interest rates and thus a lower yield on American assets.

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