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Tonawanda Valve Co. was getting nervous that it might lose some of its auto engine valve finishing business to foreign competitors.

But the U.S. dollar hitting lows against the yen, euro and other currencies has put Tonawanda Valve in a better position.

"Since the euro is increasing in value relative to the U.S. dollar, it becomes more expensive to do that work in Brazil, England or Germany," said president Michael D. Deakin. "We're becoming more competitive."

The U.S. dollar has tumbled 30 percent during the past few years and is at a nine-year low against an index of major currencies. The dollar fell Friday to 103.08 Japanese yen, trading near 4 1/2 -year lows.

The dollar hit an all-time low of $1.31 against the euro on Thursday, strengthing a tiny bit Friday to close at $1.30. Inversely, one U.S. dollar is worth 0.77 euros.

It hit a 12-year low of nearly 84 U.S. cents against the Canadian dollar early last week, before ending the week slightly stronger at 83.7 cents. Inversely, one U.S. dollar is worth $1.19 Canadian.

But Deakin is also seeing the downside of a weakening U.S. dollar at Pellets LLC, another company he owns. It makes tiny metal pellets used to strengthen and clean metals in various manufacturing processes.

He buys his steel from India, where it costs 30 percent to 35 percent less than U.S. steel. But his money isn't going as far these days because of the dollar's falling value. And raw material makes up 80 percent of costs.

"It's a little hard for us to judge the overall effect because we both import and export," Deakin said.

Retailers have a much clearer picture. More Canadians are shopping at U.S. malls, according to informal counts of cars in parking lots done by the malls themselves. The Canadian dollar is stronger than it has been in a decade. It was worth just 70 U.S. cents in May 2003 compared with 83.7 U.S. cents now -- an increase of nearly 20 percent.

About 15 percent of shoppers at the Walden Galleria in Cheektowaga are from Canada, compared with a high of 12 percent last year, said mall manager James L. Soos.

However, Canadian shoppers aren't flocking to U.S. malls like they did in the late 1980s and early 1990s when the Canadian dollar was close to 90 cents. "I don't think it will ever get back to the days of 14 years ago," Soos said. "Today, there are more U.S. retailers doing business in the Canadian marketplace."

During 1990 and 1991, Canadians made up between 20 percent to 25 percent of shoppers at the Galleria. During the holidays, the figure reached 30 percent.

Fortunes were reversed just a few years ago when the Canadian dollar was at 63 U.S. cents and U.S. shoppers were flocking across the border where the dollar was worth $1.59 Canadian.

The U.S. dollar has been falling for several reasons.

One is that interest rates near historic lows make the United States unattractive to foreign investors who can get better returns elsewhere.

Also, the U.S. stock market is still well below its tech-bubble highs.

And the U.S. budget deficit and the size of the U.S. current account deficit aren't helping the dollar, either. Federal Reserve Chairman Alan Greenspan talked to a group of European bankers Friday about these issues and sent the dollar falling further.

At the end of the federal fiscal year on Sept. 30, the federal deficit stood at $412 billion. The gap is equivalent to 5.7 percent of gross domestic product, up from 5.1 percent in the first quarter, meaning the U.S. economy needs to attract about $1.8 billion a day to maintain the value of the dollar, based on calculations by Bloomberg News. The current account is a measure of trade, services, tourism and investments.

"It seems persuasive that, given the size of the U.S. current account deficit, a diminished appetite for adding to dollar balances must occur at some point," Greenspan said at the conference.

While Greenspan said the deficit and current account balances are too large, financial experts say he's not really that concerned.

"They say those are bad things, but they understand that the weakening of the dollar will help the trade deficit and the U.S. economy," said Brian Taylor, vice president and head of foreign exchange trading at M&T Bank. "If they said they wanted a weakened dollar, there would be a big sell-off. They at least verbally have to say we want a strong dollar, but everyone knows they don't mind a weaker dollar."

Indeed, President Bush in Japan on Saturday said he is committed to a "strong dollar" and to cutting the federal budget deficit.

Bush's comments "don't amount to anything more than political posturing," said Monica Fan, global head of currency strategy at RBC Capital Markets in London. The dollar is unlikely to strengthen until the trade and current-account deficits are cut, she said.


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