The weakened dollar is causing disquiet in the world economy

The weakened dollar is causing disquiet in the world economy

‘Weak dollar not in anyone’s interest’

01 July 2008

As signs appeared that the US was still facing recession, a senior Chinese finance ministry official said any excessive fall in the dollar’s value would not be in the interest of the US or the global economy and that China hoped US officials would take effective steps to address that issue.

“We hope that the US will take a responsible stance to the issue of the dollar’s exchange rate. That’s in the interest of the US and is necessary for the stability of the global system of foreign exchange,” assistant finance minister Zhu Guangyao told reporters.
Speaking after a two-day session of economic talks with the US, Zhu reiterated that China would continue to carry out reform of its exchange-rate regime, but would do so according to the principles of “self-initiative, gradualism and control.”
“This is not only necessary for China, but is also the responsible thing to do towards our neighboring countries and the rest of the world,” he said.
The yuan has appreciated by about 20 per cent since July 2005, when Beijing revalued it and untethered it from a dollar peg, but US officials and businesses say it remains undervalued.
Zhu added that an agreement between the US and China to launch talks on a bilateral investment treaty would be beneficial to both countries, and the continuation of the “strategic economic dialogue” with the United States was in the interests of both.
The bilateral investment treaty will “have a far-reaching impact on the China-U.S. investment environment and trade relations and on global trade relations.” he said.
A gauge of future US economic growth fell in the second week of June and its annualised growth rate, deep in negative territory, shows the economy is still facing a recession, a research group said.
The Economic Cycle Research Institute (ECRI), a New York-based independent forecasting group, said its Weekly Leading Index slipped to 132.6 in the week to June 13 from 132.9 in the previous period, upwardly revised from 132.5.
The fall in the index was due to higher interest rates and lower activity in the housing market, and was partly offset by lower jobless claims, said Lakshman Achuthan, managing director at ECRI, in an instant message interview.
The index’s annualised growth rate was unchanged at negative 5.8 per cent, but the prior week’s figure was revised up from negative 6.2 per cent.
“The Weekly Leading Index fell for the fourth time in five weeks, and its smoothed growth rate, while unchanged, stayed solidly negative,” Achuthan said. “The unambiguous message is that the economy has not veered away from the recession track.”

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