THE DOLLAR'S REBOUND…

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When asked what they thought the dollar's recent reboundmeant for the economy, this week's poll respondents were splitalmost exactly down the middle. A slight majority (53%) believethere is much more pain ahead before things get better. Theremaining 47% are hopeful that this is the start of a recovery.David Houston, president of Colliers Houston & Co., is one ofthe hopeful ones. Here is what he had to say:

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"The U.S. Dollar Index hit a low in Mach as the Federal Reserveslashed interest rates to mitigate the credit crisis. What the U.S.did right was to employ both fiscal and monetary incentives veryearly in the economic slowdown. This seems to have made the currenteconomic downturn a very shallow one.

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"At a conference I attended at the end of June in Europe,members of the European Union were furious that the EuropeanCentral Bank had not acted as decisively as the U.S. had in dealingwith the economic issues at hand. However, in all fairness, theCentral Bank does not have the power of the Federal Reserve andcan't react the way the Federal Reserve did to save some of themajor financial institutions which were threatened by a liquiditycrisis.

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"As a result, as the European economy enters a downturn, theU.S. seems to be in much better shape. The dollar has recoveredagainst virtually all currencies, and the U.S. seems to haveescaped from a major recession. Lower demand for oil and the lackof refinery damage from Hurricane Gustav have helped a lot. TheU.S. had a record trade surplus in the 2nd quarter and GDP grew bymore than 3%. A higher dollar hurts the trading balance ofaccounts, but it makes oil much less expensive. If the dollar wason par with the euro, oil would be about half its current marketvalue. So, while the road ahead may be a bit rocky, the U.S.economy should outperform Europe, Japan and most of Asia during thenext four quarters. It looks like we have dodged the bullet."

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