The Outlook for the Dollar in 2008 Jay H. Bryson, Global Economist October 9, 2007

2 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: Federal Reserve Board The Dollar’s Slide Has Renewed in Earnest This Year.

3 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: U.S. Department of Commerce and Wachovia Corp. The Current Account Deficit Likely Will Remain “Large” For Some Time.

4 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: Department of Commerce and Wachovia Corp. Foreign Purchases of U.S. Assets Are Starting to Trend A Bit Lower.

5 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: Department of the Treasury and Wachovia Corp. Purchases of U.S. Assets by the Foreign Private Sector Significantly Exceed Official Purchases.

6 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: Department of the Treasury and Wachovia Corp. Purchases of Fixed Income Securities Are Significantly Larger Than Purchases of Stocks.

7 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: Department of Commerce and Wachovia Corp. U.S. Purchases of Foreign Assets Are Trending Higher.

8 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: U.S. Department of Commerce and Wachovia Corporation The Current Account Deficit Should Get Smaller Going Forward.

9 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: Bloomberg LLP and Wachovia Corp. Interest Rate Differentials Have Moved Against the Dollar.

10 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: Global Insight and Wachovia Corporation Dislocations in Credit Markets Could Cause Growth to Slow.

11 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: Department of the Treasury and Wachovia Corporation Reduced Issuance of Structured Fixed Income Products Will Give Foreigners Less U.S. Securities to Buy.

12 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: Bloomberg LLP, Morgan Stanley Capital International, and Wachovia Corp. Stock Market Returns Abroad, Especially in Emerging Markets, Have Been Superior, Than in the U.S.

13 Wachovia Economics Group Wachovia International Economic Forecast Global Growth Should Remain Solid. Source: Wachovia Corp.

14 Wachovia Economics Group  Due to the downside risks to growth, the Fed should cut rates again in October.  Most major foreign central banks likely will keep rates on hold for the foreseeable future.  In sum, interest rate differentials likely will not move back in the dollar’s favor for some time. Interest Rate Outlook

15 Wachovia Economics Group Source: Wachovia Corp. Wachovia Major Currency Outlook

16 Wachovia Economics Group Source: Wachovia Corp. Wachovia Emerging Market Currency Outlook

17 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: Asset-Backed Alert and Wachovia Corporation The Dollar Could Strengthen if Risk Taking Becomes Rampant Again.

18 Wachovia Economics Group Growth Sustained Remains Below Trend PCE Continues to Maintain Strength Residential Weakness Yet to Infect Economy Source: U.S. Department of Commerce and Wachovia Corp. Foreign Investors Will Not Likely Begin to Dump U.S. Assets.

19 Wachovia Economics Group  The Large Current Account Deficit in Conjunction with Narrowing Interest Rate Differentials Have Weighed on the Dollar.  Although the Current Account Deficit Will Gradually Shrink, Interest Rate Differentials Are Not Likely to Move Back in the Dollar’s Favor Anytime Soon.  In Addition, Reduced Issuance of Structured Fixed Income Products Will Give Foreign Investors Fewer U.S. Assets to Buy.  The Dollar Could Strengthen, at Least Temporarily, if Risk Taking Becomes Rampant Again.  The Probability of a Dollar “Meltdown” Is Rather Small. Summary

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22 Wachovia Economics Group John E. Silvia, Ph.D. Chief Economist Economics Group    U.S. Macro Economy  Interest Rates  Monetary Policy    U.S. Macro Economy  Real Estate  Regional Economics: State & MSA Level    Global Economies  Foreign Exchange Mark Vitner Senior Economist Jay H. Bryson, Ph.D. Global Economist Sam Bullard Economist    Desk Operations  Financial Services    Quantitative Macro-Economic Modeling    U.S. Macro Economy  Consumer & Retail  Non-residential Real Estate Huiwen Lai, Ph.D. Quantitative Analyst Anika Khan Economist Azhar Iqbal Quantitative Analyst    Quantitative Macro-Economic Modeling    U.S. Macro Economy  Real Estate  Industrial Growth & Services    U.S. Macro Economy Adam G. York Economic Analyst Tim Quinlan Economic Analyst Appendix Wachovia Corporation Economics Group publications are distributed by Wachovia Corporation directly and through subsidiaries including, but not limited to, Wachovia Capital Markets, LLC, Wachovia Securities, LLC and Wachovia Securities International Limited. The information and opinions herein are for general information use only. Wachovia does not guarantee their accuracy or completeness, nor does Wachovia assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. © 2007 Wachovia Corp.