All about business

The U.S. Federal Reserve is poised to cut interest rates again this week while the European Central Bank remains on hold for a while, leaving the beleaguered U.S. dollar caught in the cross-fire.

The slumping U.S. currency has contributed to oil’s climb to $111 per barrel. It is part of the reason behind investors’ mad dash to buy other commodities, ranging from wheat to gold. The slide is also feeding malaise among European exporters struggling to compete with cheaper U.S. goods, and prompting some big oil exporters who pegged their own currency to the dollar to rethink that policy.

While calls have intensified for official government intervention to stem the dollar’s decline, Washington has shown no inclination to act. Finance leaders in Europe and Japan ratcheted up the rhetoric last week as the dollar hit an all-time low against the euro, and sank below 100 yen for the first time in more than a decade. So far, it remains all talk.

Only the Bank of Israel stepped in last week with official action, twice buying foreign currency to cool the shekel, which had hit an 11-year peak against the dollar.

Goldman Sachs strategists called the Bank of Israel’s moves “a sign that the pace of dollar decline is becoming more uncomfortable in places.”

That discomfort is apparent in recent comments from world leaders no teletrack payday loans. British Prime Minister Gordon Brown said volatility in currency rates “obviously worries people.” European Union leaders repeated their view that excessive currency moves are “undesirable,” although Eurogroup Chairman Jean-Claude Juncker said on Friday they did not discuss any intervention.

In Japan, Chief Cabinet Secretary Nobutaka Machimura said the yen’s moves seemed to reflect dollar weakness rather than yen strength. “As for currency intervention, I will not comment,” he said at a news conference on Friday.

U.S. President George W. Bush acknowledged last week that the weakening dollar was contributing to oil’s steep upward march. But Treasury Secretary Henry Paulson, the main spokesman for the U.S. currency, stuck to his well-worn script, saying a strong dollar was in the nation’s best interest, and healthy long-term U.S. fundamentals would be reflected in exchange rates. 

Read more