The dollar dropped again after a slight rebound after US Treasury Secretary John Snow once again reiterated the stance that exchange rates are best determined by the market. The US currency that experienced a turnaround after setting record lows in December on Mr. Snow’s statement that US administration wants “to do things to sustain the strength’’ of the dollar, plunged again after the markets absorbed the same comment about the efficiency of the market forces that hurt the greenback in the past. Today the dollar fell to $1.3175 against the euro.

``He implied that they’re not willing to take a more hands- on approach with regard to dollar weakness,’’ said Marios Maratheftis, a currency strategist at Standard Chartered Plc in London. ``The market was a bit taken by surprise on Friday’’ by Snow’s previous remarks.

"People are confused about the United States’ stance on the dollar," said Ian Gunner, head of foreign exchange research at Mellon Bank. "Until there is a deliberate shift in U.S. policy, the dollar’s downtrend could continue."

Traders are waiting for the US trading data that will be released on Wednesday and can cause a further drop in the dollar’s position against the euro, or contribute to the rebound.

The dollar decline was precipitated by the report issued by the ZEW Center for European Economic Research that said its index of institutional and analyst sentiment rose to 26.9 in January, limiting the fears of stagnation.
``We have a confirmation that there will be an expansion of growth in 2005 and this data is supporting the euro,’’ said Benedikt Germanier, a currency strategist at UBS AG in Zurich.

European Central Bank President Jean-Claude Trichet speaking at a G-10 meeting in Switzerland applauded Mr. Snow’s "important contribution to advance this global consensus". Trichet expressed assurance that a "large part" of the rise in oil prices is over.

Trichet shared his optimism about the prospects of the global economy predicting a growth rate of 4% in 2005. The ECB is expected to leave the interest rates unchanged as the inflation that is at 2.4% at the moment will probably slow to 2% in March. The ECB is expected to raise rates in the fourth quarter and to finish the year with a 3% rate.

On the other hand, the US Fed is projected to continue with its “measured” accommodative pace of quarter-point rate increases in its February meeting, and some even expect a more decisive move to a half-point in the light of the more hawkish minutes revealed by the US monetary policy makers.

The interplay of the interest rate hikes could drive the dollar price up, although it could hardly remove the fundamental imbalances in the US economy.