Washington, Oct 09: The US administration has embarked on a risky strategy to bring down the value of the dollar as part of an effort to keep a fragile economic recovery on track. Analysts say the us effort could alleviate some economic woes, but that if not handled correctly could scare off foreign investors needed to finance the country's massive trade and investment deficits.


The greenback, which has been on a downward trend for months, accelerated its move after last month's group of seven meeting in which the world's economic powers called for more exchange rate flexibility -- an effort widely seen as calling for a weaker dollar.

"There is little doubt that there is a strong consensus in the markets that us policymakers have decided to push the dollar lower as a policy lever to complement stimulative monetary and fiscal policies adopted during 2003," said Citibank chief currency strategist Robert Sinche.

A weaker dollar, long sought by us industry, would make US products more competitive and boost profits for US multinationals.

It would also ease worries about deflation by making imports more expensive, and over time could curb the massive US trade deficit that has allowed Asian nations to build up massive dollar reserves.
The US current account deficit, the broadest measure of trade and investment, hit 503.4 billion dollars last year and is still growing.

Bureau Report