the u.s. dollar will see an orderly decline

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    From Reuters
    Tuesday, January 25, 2005

    WASHINGTON -- The U.S. dollar will see an orderly decline
    over the next two years, the Congressional Budget Office
    said in a report on Tuesday.

    "CBO expects that the exchange value of the dollar will
    decline during the next two years, largely because continued
    deficits in the nation's current account will raise net
    liabilities to foreigners to new highs," said CBO, Congress'
    nonpartisan fiscal watchdog.

    "In CBO's view investors will be less willing to add to their
    holdings of dollar assets at current exchange rates and interest

    It said although some analysts have raised the possibility of a
    sharp fall in the dollar, CBO expects it to be an orderly fall
    with little disruption to the U.S. economy.

    CBO said this is because the expected return on investment in
    the United States is still higher than in other countries. Also,
    many countries that trade with the United States would want to
    minimize the potential damage to their own economies by
    stopping the dollar from falling too sharply.

    CBO is also predicting an orderly fall because depreciation of
    the dollar will eventually help boost U.S. net exports and
    economic growth.

    "That positive aspect of a drop in the dollar's value also helps
    limit the extent of its fall," CBO said.

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