Merrill's Rosenberg Says Dollar Decline Not Armageddon Calamity

Bloomberg) -- The falling dollar isn't cause for alarm and part of a ``global rebalancing process,'' according to David Rosenberg, chief North American economist at Merrill Lynch & Co.

The dollar, which has dropped 31 percent against the euro over the past five years, reflects a correction of the U.S. currency's overvaluation from 1997 to 2002, said Rosenberg in a research note dated Nov. 2. The dollar, measured by the Federal Reserve's trade-weighted index, was little changed yesterday compared with its worth a decade ago, he said.

``The dollar is no lower today than it was in 1997 -- we don't remember that being a particular Armageddon-type time period,'' Rosenberg said. ``Far from being a disturbing development, the dollar's decline is part and parcel of the global rebalancing process.''

The dollar gained 0.2 percent to $1.4469 per euro at 5:15 p.m. yesterday in New York after Citigroup Inc. said it may write down subprime-related assets by as much as $11 billion, prompting investors to shun risk and seek safety in U.S. government debt.

The U.S. currency dropped to a record low of $1.4528 on Nov. 2. The Fed's broad trade-weighted dollar index fell to 98.25 on Nov. 2, the lowest since November 1996.

The index reached 130.07 in February 2002, its highest since January 1995, when Bloomberg began collecting the data. The dollar benefited from the slump of Asian currencies after the 1997 financial crisis, a sell-off in commodities-linked currencies, euro softness and a Japanese recession, Rosenberg said.

The dollar index showed an ``unwinding in an orderly fashion the multiyear period of overvaluation of the past decade,'' Rosenberg said.