>The thing I don't get about the dollar's drop against the euro is how it's
>supposed to do much about the trade deficit, when something like three
>quarters of the deficit is with five or so East Asian countries -- most of
>whose currencies so far haven't risen very much (and China's hasn't changed
>at all, of course). Europe doesn't account for much of our trade deficit.
>Yet most of the dollar's slide has happened there. The only thing I can
>think of is that it could pressure the ECB to cut interest rates.
Yup. GS says the best regression fits are with the broad dollar index, which is off just 8.5%, about half as much as against the euro. The more I think about it the more I think the Bush admin is happy to see the euro appreciate as a way of saying fuck you to the cheese-eaters. They're playing with fire - a dollar crisis and a failed Treasury auction could be very nasty. But they're used to that.
Doug