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The dollar has weakened against major currencies, tumbling to the 115 range against the yen, while the euro has regained parity with the U.S. currency for the first time in two years and five months.

At first glance, the dollar fall appears to have been caused by the U.S. stock market slump. More fundamentally, widespread anxiety toward corporate America has highlighted the risk of investing in dollar assets and their reduced profitability. It’s now safe to say the dollar will enter a major adjustment phase from its late 1990s strength.

Federal Reserve Chairman Alan Greenspan, in Senate testimony July 16, warned against easy dollar-fall forecasts. But the remark itself suggests many investors believe the unit is headed down.

Greenspan also stressed that the U.S. economy, while being hampered by corporate accounting scandals over the short term, will probably be on a path of sustainable growth once these problems are resolved.

However, the administration of U.S. President George W. Bush itself is now under fire over the scandals. The Republican Party, with its probusiness position, may be destined to face such criticism.

As the nation braces for midterm elections in November, the administration obviously hopes to pursue two conflicting themes — accusing those responsible while leaving the root causes of the problem vague. Given that Bush faces such a dilemma, it would appear that U.S. authorities will have a hard time ridding the stock market of its woes in the near future.

Therefore, we should realize that the “short-term” slump of the U.S. economy mentioned by Greenspan may continue for several months — not just weeks — and that during that period the dollar will remain weak.

Japanese financial authorities will probably launch full-scale market intervention to support the dollar once it dips below 115 yen — a crucial point below which the profitability of Japan’s export-led industries will be in danger.

The dollar is thus not expected to fall much below the 110-115 yen range for now.

As for dollar-euro rates, European Union monetary authorities still welcome the euro’s strength against the dollar. As long as they maintain such a position, the euro will probably rise further.

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