US Dollar Likely To Continue Slide, Say Analysts

Source : TODAY, Wednesday, October 17, 2007

The United States dollar is likely to continue to weaken as the Federal Reserve looks set to cut rates further as early as December and on a fastgrowing US trade deficit, Standard & Poor’s (S&P’s) economists said.

But the dollar’s depreciation against Asian currencies isn’t likely to be precipitous, as Asian central banks will enter currency markets to “artificially” manoeuvre foreign exchange rates, now that monetary tightening in the region has almost come to an end, the economists said.

Mr David Wyss, chief economist at S&P, expects the Fed to lower its federal-funds rate by another 25 basis points in December or January, after cutting it by 50 basis points last month.

US economic growth will hover around 2 per cent this year and next year, while Asian economies will expand by around 7 per cent until next year despite an expected slowdown in the world’s biggest economy, he said.

But S&P Asia-Pacific chief economist Subir Gokarn warned a surge in global oil prices in the wake of ongoing geopolitical risks could send shock waves across Asian economies.