International support for the dollar ... kind of

Bloomberg reports that international trading partners are finding new ways to support the U.S. dollar - not by buying them, but by limiting how fast they can be sold.

Central banks from Bogota to Mumbai are imposing foreign-exchange curbs to take control of their soaring currencies from traders dumping the dollar.

In Colombia, international investors buying stocks and bonds must leave a 40 percent deposit at Banco de la Republica for six months. The Reserve Bank of India created a bureaucratic thicket to curb speculation by foreign money managers. The Bank of Korea is investigating trading of currency forward contracts to limit gains in the won, now at a 10-year high.

Instead of using currency reserves or interest rates to influence foreign exchange markets, central banks and finance ministries are setting up obstacles to keep the falling dollar from threatening company profits and economic growth. The U.S. currency slumped 10 percent this year against its biggest trading partners, the steepest decline since 2003, while Treasury Secretary Henry Paulson has reiterated that the U.S. supports a "strong"' dollar.
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The extent of the dollar's slump reminds some traders of 1973, when former President Richard Nixon's Treasury Secretary John Connally abandoned the Gold standard while the U.S. was in recession and inflation exceeded 10 percent. The dollar lost 40 percent against the yen in the next five years.

Since 2002, the U.S. currency has fallen 40 percent against the Canadian dollar, 33 percent versus the euro and weakened 24 percent compared with the British pound.

Also in the currency headlines this morning is another report on Brazilian supermodel Gisele Bundchen in which her currency preferences are clarified.

See this item from last week for background.

Bundchen, who Forbes magazine says earned an industry-best $33 million in the year through June, is making sure she is paid where she works, according to Patricia Bundchen, her twin sister and manager. Bundchen's Web site says of her advertising campaigns for 16 companies this year, nine are with ones in Europe, three are Brazilian, one is Turkish and another is for part of a Japanese firm. Two are from the U.S.
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Bloomberg News has spoken to her manager and agent several times since then and was the source of worldwide media reports on Bundchen after an exclusive Nov. 5 story, "Supermodel Bundchen Joins Hedge Fund Managers Dumping Dollars," that showed the model's affinity with Warren Buffett and Bill Gross, both longtime bears on the dollar.

The U.S. currency fell to a record low last week against the 34-year-old Trade Weighted Dollar Index, a foreign exchange benchmark.

"It's false that she only takes euros," Patricia Bundchen said in a phone interview on Nov. 7 from Porto Alegre, Brazil. "It's a Brazilian contract, in reais," she said of the Pantene contract.

Those of you thinking that the Gisele update was just an excuse for re-running the above photo on what is otherwise a dreary Monday morning, well, you just might be correct.