By Lin Guan (chinadaily.com.cn)
Updated: 2007-10-19 15:47

The US dollar will not slump despite recent selling of US treasuries, former Federal Reserve Chairman Alan Greenspan said when attending a forum in Seoul yesterday, China Securities Journal reported.

The meeting of G-7 Finance Ministers draws closer, heated debates on US dollar exchange rates are going on. Meanwhile with Japan in the lead, 15 of all the 27 main US treasuries stakeholders, including Russia, China and France, are unloading their holdings. Japan had the biggest cut in US financial assets for the last seven years ending August.

Before all the dumping began, US President George W Bush and Treasury Secretary Henry Paulson supported a hard US dollar. In an interview with British Media last week, Managing Director of International Monetary Fund Rodrigo de Rato y Figaredo said the US currency was undervalued in terms of many standards. However, he quickly "corrected" himself this week by saying that although the US dollar is very close to its lowest point ever recorded, there is still room for devaluation.

Greenspan was asked at the Seoul forum if the dollar will plunge if the dumping trend continues. He said, the trend won't spark a rapid decline in the currency because large offloading of those countries are nothing new and the market will not overreact.

According to the US Department of the Treasury, Japan sold four percent or US$24.8 billion of its total holdings, the most since March 2000. Japan has been reducing its holdings since three months earlier in increasingly larger monthly sums.

Compared with Greenspan's optimism, former Japanese top currency official Eisuke Sakakibara said US dollars may see drop significantly in value in 2008, drawing US, European and Japanese interference in the foreign exchange market.

Eisuke Sakakibara also predicted in an interview in Tokyo that US economic growth rate will fall below one percent due to the subprime mortgage crises. As the growth rate drops below one percent, US dollars may plunge correspondingly, he added.

The dollar weakened to $1.4283 per euro on October 1, the lowest since the euro debuted in January 1999. According to Eisuke Sakakibara, the exchange rate of the dollar against the euro may pierce 1.45 in 2008.

As of 18:40 October 18, one euro equals 1.4258 dollars, close to the recorded high, and the US dollar index dropped 0.4 percent to 77.73.