Turning the tide on the Dollar?

Is the Bernanke/Paulson strategy on the dollar starting to pay off? Sarkozy seems to think so:

Sarkozy's complaints that the U.S. currency's drop against the euro is undermining European competitiveness struck a discordant note in a summit intended to demonstrate an improving U.S.-French relationship. His comments came as the euro surged to a record high against the dollar. The currency touched $1.4731 today, a 65 percent gain since the end of 2001.

Concern that the euro is too strong has been a Sarkozy theme since his presidential campaign earlier this year. Since his May 6 election, he has urged European Central Bank officials to lower interest rates to weaken the currency.

``If anything, this is a signal to the ECB that the euro has accelerated and they need to bear that in mind and not rush to raise rates,'' said Laurence Boone, chief French economist at Barclays Capital in Paris. ``When the dollar is depreciating, French firms are more affected than those in Germany.''

Germany hasn't joined Sarkozy in his effort to weaken the currency. German Chancellor Angela Merkel isn't concerned by the euro's appreciation, a Finance Ministry spokesman said. Asked at a Berlin news conference today whether the government ``is concerned'' about the single currency's rise to a record, Finance Ministry spokesman Torsten Albig said: ``No.''

Airbus Costs

Sarkozy said yesterday that Toulouse, France-based Airbus SAS, the world's biggest planemaker, loses about 1 billion euros ($1.5 billion) for every 10-cent increase against the dollar.

``Those who admire the nation that has built the world's greatest economy and has never ceased trying to persuade the world of the advantages of free trade expect her to be the first to promote fair exchange rates,'' Sarkozy said. He repeated his concern that the Chinese yuan is unfairly undervalued.

The dollar will rise against the Euro if either we raise interest rates or the ECB lowers theirs. Looks like they just blinked.