Dangers of a diving dollar

WITH a week to polling in the American election the dollar is looking extremely sick. In latest trading the currency fell to within one cent of its lowest-ever point against the euro which stood at $1.28. It also hit lows against the yen and other Asian currencies.

As for the pound it is trading at an eight-month high against the dollar at $1.84 and is holding its own against the euro, despite hints from the Bank of England that British interest rates may have reached their peak. Former FT editor Richard Lambert, now elevated to the Monetary Policy Committee, argues that the commentators who believe that the new consumer prices index is giving a false impression on inflation are wrong.

So why then is the dollar coming under such pressure? A big part of the weakness arises because of America's current account deficit, now heading for 6% of gross domestic product. This is seen by the former US Treasury Secretary Lawrence Summers as too high.

There is speculation that whoever wins the election will seek to lower the current account deficit which will mean devaluation.

A John Kerry win - which until a month ago was not even on the radar - could also see a switch in policymakers in Washington.

Even Alan Greenspan, the legendary chairman of the Federal Reserve, could be in danger with former Treasury Secretary and Goldman Sachs chief Robert Rubin thought to be the Senator's choice for the job.

Stephen Jen, of Morgan Stanley, suggests that one scenario if the Democrats are elected is a 1997 Asian currency crisis in reverse, with the dollar falling violently on foreign exchanges. That would have serious consequences for all holders of US currency reserves including the Middle East oil producers.

All of this will look a bit puzzling given the weak state of the European economies. In Brussels, Signor Prodi is moaning about the failure of reforms in euroland. Yet the euro is the main beneficiary of dollar weakness.

The markets believe significant shifts in US economic leadership will take place whatever the election outcome. The dollar has become the focus of global uncertainty.

Prawn offensive

MANCHESTER United may have rebuffed American suitor Malcolm Glazer but that is not the end of the matter. Glazer and his family are serial entrepreneurs who are not easily turned aside. They do not want to be left holding a minority 28.11% stake without any leverage over their investment.

So far they have been unsuccessful in persuading Irish investors John Magnier and JP McManus to part with their 28.89% stake despite reports that they have an exit price. The Irish investors are rich, accomplished gamblers and recognise this auction is by no means exhausted.

Glazer still has the option of buying more in the market and going hostile. But as the owner of another successful sports franchise, the Tampa Bay Buccaneers, he needs to recognise the importance of bringing the fans along.

So far the private investors, who control nearly 25% of the equity, have heard little from Glazer to lift their hearts. The image of a club burdened by £300m of debt, secured on future season ticket income streams, has them choking on their famed prawn sandwiches.

Somehow Glazer needs to convince supporters that he is not an ogre. The fact that the Bucs last year won the Superbowl - the most cash-rich sports event in the world - ought to be reassuring.

But supporter-investors want to know this is not just another deal. They need Glazer to demonstrate he has marketing plans for ManU beyond what has been achieved so far and that a good proportion of the cash generated will be reinvestedin the very best players. As Chelsea fans have learnt, private ownership by a wealthy individual gives more freedom than control by a public company where every last penny - including sweetheart deals with agents - has to be fully disclosed. The Glazers so far have done nothing but make enemies inside and outside Old Trafford.

They will need to smarten up their act if they don't want to find themselves stranded.

Bloomer botch

JONATHAN Bloomer and the Prudential made a huge mistake in failing to prepare investors for the change in growth strategy which required a £1bn cash issue.

Markets hate unscheduled events, especially when they come from one of the nation's biggest institutions which should have known better. It is unlikely that chairman David Clementi will unseat Bloomer over this.

But the focus will be on chief executive succession when the fuss dies down.