The dollar may remain under downward pressure against all other major currencies for some time.

Although selling pressure has eased to some extent, lingering fears of further terrorist attacks on the U.S. and worries about Wall Street’s poor performance make further volatility seem inevitable.

The dollar came under selling pressure late in February amid concern over heightened Mideast tensions and has since given up some 10 percent in value against its major counterparts.

Although an unchecked fall in the dollar’s value appears unlikely, the long-range downward trend of its value remains unchanged.

Optimism about U.S. Treasury bonds and U.S. monetary policy options will probably recur periodically, helping to shore up the dollar.

Japanese monetary authorities, for their part, have signaled to the market that they intend to keep the yen from gaining further ground against the dollar.

Since late last month, the Bank of Japan has intervened repeatedly, selling more than 2 trillion yen for dollars, but questions remain over how strong the BOJ’s resolve actually is.

The recent developments on the currency market did not come up for discussion at last week’s meeting of financial leaders from the Group of Seven industrial nations, fueling speculation there was a tacit agreement to allow the dollar to give up ground against other currencies.

There is little dispute that the dollar is still overvalued and, given the bloated U.S. current-account deficit, a gradual dollar fall would suit the U.S. and the world economy best.

Japanese monetary authorities appear to be expecting the dollar to fall chiefly against European currencies while holding its own against the yen, but that is simply wishful thinking.

With an eye on the delay in Japan’s structural reforms and the country’s still flagging economy, U.S. and European monetary authorities can remain skeptical about Japan’s moves to stem the yen’s appreciation.

Japan’s fast-growing trade surplus could keep the dollar running in excess supply in Japan at an annual rate of trillions of yen this year. This would make it unlikely that the yen would fall on its own.

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