Newspaper article The Christian Science Monitor

In US, a Rare Revolt against Dollar ; Exporters and Unions Blame a High Currency, Up More Than 50 Percent since 1995, for Sagging Sales and Layoffs

Newspaper article The Christian Science Monitor

In US, a Rare Revolt against Dollar ; Exporters and Unions Blame a High Currency, Up More Than 50 Percent since 1995, for Sagging Sales and Layoffs

Article excerpt

The United States dollar has come under siege. But it's not on foreign-exchange markets, where the dollar stands at about a 16- year high. It's under fire at home.

Farmers, manufacturers, and organized labor are calling for a retreat from the "strong dollar" policy that was a mainstay of the 1990s boom.

"Our export business is off 50 percent," says Martin Slagle, a senior vice president at Morgan Manufacturing Co., a maker of truck- mounted concrete pumps in Yankton, S.D. "The strength of the dollar ... has devastated us."

Since 1995, the dollar is up 70 percent against the German mark and some other key European currencies. It has soared 50 percent against the Japanese yen.

The result: US exports are more expensive to foreign buyers, causing a severe downturn and layoffs in some industries.

Usually, exchange rates are of interest only to economists, corporate accountants, and tourists boarding a plane for Paris.

But as the US economy has weakened, the issue has been coming into sharper focus, with mounting pressure on the Bush administration.

Prior to a summit of major industrial nations last month, the National Association of Manufacturers (NAM) sent a letter to President Bush, asking him to "make currency realignment a top economic priority." He hasn't.

"The dollar is ridiculously overpriced," says Frank Vargo of the 14,000-member group, which is based in Washington.

John Sweeney, president of the AFL-CIO, the nation's labor federation, echoed the plea in a simultaneous letter to Mr. Bush.

In the next week or so, the NAM expects to announce a coalition of various trade associations to fight for a weaker dollar.

But figuring the "right" level is difficult. A strong dollar hurts some Americans, but benefits others. Consumers get cheaper cars and other goods. Tourists abroad enjoy a cheap trip. US exporters suffer. So do American tourist facilities.

Moreover, actually engineering a change in currency values is difficult, and holds significant risks.

A shift in rhetoric by the Treasury secretary is sometimes enough to move exchange rates, and central banks occasionally intervene in currency markets. But by and large, exchange rates are set by supply and demand.

Currently, foreigners want dollars to invest in the US, and that desire allows the US economy to import more goods than it exports. In fact, foreigners are happily sinking nearly $600 billion a year into US bonds, stocks, companies, and real estate.

But when sentiments change, they can sometimes be hard to control.

"If foreign investors' appetite for dollar-denominated assets were to diminish, the result could be a sharp plunge in the value of the dollar and potential havoc in the US bond and equity markets," economist William Dudley told a Senate Banking subcommittee hearing July 25. …

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