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US Dollar Falls to Record Low Against Euro, Yen

The U.S. dollar Friday fell to another record low against the euro and a four-year low against the yen. The dollar decline accelerated after Federal Reserve Board chairman Alan Greenspan warned that foreigners could lose their appetite for buying the U.S. securities that finance America's large trade deficit.

Mr. Greenspan told a bankers meeting Germany Friday that the chronic United States trade deficit is becoming more of a problem. It cannot be expected, he said, that foreign central banks will forever wish to finance the deficit through purchases of U.S. securities. At some point, said the influential 78 year-old central banker, investors will adjust their accumulation of dollar assets, or alternatively, seek higher dollar returns to offset the concentration of risk. Mr. Greenspan called on Congress to take action to roll back the still expanding U.S. fiscal or budget deficit.

The dollar slid through the $1.30 level against the euro and fell to 104 Japanese yen. John Williamson, a dollar analyst at Washington's Institute for International Economics, believes the dollar will continue to fall and that there is a danger of an uncontrolled decline.

"I think there is a fair danger that it is going to go a good bit further and that it is going to get out of hand, as it were," he noted. "I don't think that is a big threat to the United States but I do think it is a big threat to other countries, perhaps most particularly, Europe."

The dollar has fallen over 20 percent against the euro in the past two years and its decline has accelerated in the past few months. Mr. Williamson worries that a continued rise in the euro could trigger a recession in Europe.

Financial markets were negatively impacted Friday by a turnaround in oil prices, which have been falling from record highs over the past month. Oil rose over $2 in New York to just under $49 a barrel.