MercoPress. South Atlantic News Agency

US dollar drops 8% in 45 days against Euro.

The Euro broke a new record this Thursday reaching 1,3224 to the US dollar which means that since October 13, the greenback has depreciated 8%.

The sustained drop of the US dollar against the world's main currencies, Euro, Yen and pound sterling is attributed to the enormous budget and current account deficits of the President Bush administration.

In spite of repeated statements by US Treasury Secretary John Snow that the Bush administration favours a "strong dollar", Europeans and Japanese are convinced that the "passive" erosion of the US currency favours the acquisition of assets by foreign investors.

However there are growing concerns in Europe about the loss of competitiveness of EU exports and Professor Hans-Werner Sinn from the prestigious Economic Research Centre Ifo said this Thursday in Frankfurt that the "European Central Bank should have a more active attitude in money markets".

Meantime another source of concern for EU exports, the Chinese Yuan pegged to the US dollar seems to be reacting to world pressure.

"China's economy is in for a soft landing amid plans for a gradual shift in exchange rates", said President Hu Jintao to Asian leaders during the recent APEC summit in Santiago de Chile.

China's annual economic growth of more than 9% and the currency locked to the US dollar at 8,30 Yuan are causing growing fears among Chinese trade partners and competitors.

But apparently according to Hong Kong press, Mr. Hu Jintao promised "stable and fast growth" coupled with "basic stability" for the exchange rate.

China so far has resisted revaluation of the Yuan in spite of insistent calls from trading partners and particularly the United States which has an ever mounting deficit.

Analysts believe the Chinese currency could be undervalued as much as 40% but they anticipate a possible appreciation of 5% in the coming twelve months.

"We will gradually form a more flexible foreign exchange regime more adaptable to changes in market supply and demand", said President Hu Jintao.