From yesterday's Seattle Post-Intelligencer, "Bush, economists differ on dollar's slide":

President Bush repeated his support Monday for a "strong dollar" and blamed its recent slide on Europe's higher interest rates.

Private economists say a far bigger factor in the greenback's decline is America's record trade deficit.

Bush indicated that he believed the dollar will strengthen now that the difference in interest rates between the United States and Europe was narrowing, but many private analysts forecast a continued fall - meaning that European products will cost more in the U.S. market and American tourists will find traveling in Europe more expensive.

Bush told reporters that he had spent time last week discussing the dollar's recent decline with other world leaders at the Group of Eight nations summit in Evian, France.

"I reminded our G-8 partners that there is a difference in interest rates, particularly between Europe and the United States," Bush said. "And that interest rate differential has caused people to sell dollars to buy euros to get higher return on investment. And that's why you're seeing pressure on the dollar."...

Analysts said interest rates have played only a small part in the decline, and say the bigger reason is soaring trade deficits. The U.S. current account, the broadest measure of trade, hit an all-time high of $503.4 billion last year, up 28 percent from the 2001 deficit of $393.4 billion.

Many economists believe the current account trade deficit, which reflects not only trade in merchandise but also services and investment flows, will hit a new record of $568 billion this year, meaning the United States must attract more than $1 billion a day in new foreign investment to pay for the trade imbalance.