Paulson says US dollar will overcome weakness

The US dollar traded at $1.4688 to the euro while it was at ¥111.1300 in relation to the yen just after midday in New York on Friday after US Treasury Secretary Henry Paulson said during a trip to Africa that the dollar will come back from its recent weakness, a reiteration of the “strong dollar” policy that US Treasury secretaries have held to for more than a decade.

Even so, the US dollar has declined 11 percent so far this year and some analysts believe that Mr. Paulson’s remarks won’t have much effect on global currency markets.

Meanwhile, sterling looked like it would weaken the most this week against the euro as it has in over two years and to make its biggest one-week drop in a year and a half in relation to the US dollar.

This week’s declines for the pound make it more likely that the Bank of England’s Monetary Policy Committee will cut UK interest rates soon, perhaps as early as its December meeting.

This possibility is supported by government data showing that retail sales were down by 0.1 percent in October, for the first decline in nine months, and by a report from Nationwide Building Society predicting that the average price for a house in the UK will remain static next year after recent gains of 9.7 percent.

Just past midday in New York, the pound was trading at €1.3992 to the pound while the US dollar was at $2.0524 to the pound and the yen traded at ¥228.0830 in relation to sterling.

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