According to Investor's Business Daily: "a growing chorus of officials and executives are howling that the U.S. is losing ground to more nimble markets like London and Hong Kong." Indeed "After decades out front, a report says the U.S. hobbled itself with overly strict regulation while the spread of globalization and technology helped the rest of the field play a stellar game of catch-up."

In the post 9/11 world, the markets move faster, and there are clearly more places to put money to work with a fairly good rate of return, at least in the short term. Aside from Europe, there is China, as well as other so called emerging economies like India, Brazil, Chile, and Mexico.

The dollar remains the centerpiece of the global financial system. But it is clearly facing some very serious competition. If the dollar continues to fall, though, there will be some repercussions. The White House is hoping that a weak currency will spur demand for less expensive U.S. goods.

The problem with that argument is that it's a 20th century view, and may not be applicable to an increasingly global economy, where the Euro, the Yen, and other currencies are starting to have more influence.

Perhaps one of the most negative legacies of the Bush II era might well be the fact that the U.S. dollar might have suffered irreparable damage, and that its exclusivity as the world's reserve currency may have been permanently, or at least semi-permanently damaged.

The Institute for Supply Management index on US manufacturing activity fell unexpectedly to 49.5 in November from 51.2 in the previous month. Economists had forecast a slight rise to 51.5.

This was the first time since April 2003 the figure has dropped below the 50 level, which marks expansion from contraction. Within the overall index, new orders, which gauges future growth within the sector, tumbled to 48.7 from 52.1 in October. Employment also showed contraction, with the index falling to 49.2 from 50.8.

Omer Esiner, an analyst at Ruesch International, said: "I think this number will definitely continue to fan fears of a hard landing for the US economy."

From this edge of the Anatolian peninsula, a natural bridge between continents, let us implore peace and reconciliation, above all for those dwelling in the land called 'holy' and considered as such by Christians, Jews and Muslims alike," the [Pontiff] said. "It is the land of Abraham, Isaac and Jacob, destined to be the home of a people that would become a blessing for all the nations.

"Peace for all of humanity! May Isaiah's prophecy soon be fulfilled: 'They shall beat their swords into plowshares, and their spears into pruning hooks; nation shall not lift up sword against nation, neither shall they learn war any more.'"

Benedict XVI continued: "We all need this universal peace; and the Church is called to be not only the prophetic herald, but even more, the 'sign and instrument' of this peace. Against the backdrop of universal peace, the yearning for full communion and concord between all Christians becomes even more profound and intense."

Christians must shed the idea that they need to promulgate a worldwide Christianity, he said. "If I hold to a model of Jesus what I've committed to in my baptism is loving my enemy," Lee said. "I'm committed to not killing you, but to serving and honoring you.

It's an exclusive commitment to the way of Christ, not to the exclusive authority of Christ."

The earlier pope declared, in the lines Benedict quoted, that the two faiths owed each other special kindness "because we believe in one God, albeit in a different manner, and because we praise him and worship him every day as the creator and ruler of the world."

The pope reiterated his criticism of violence in the name of faith, while avoiding singling out Islam. In a separate speech to the diplomatic corps, he called on all religious leaders to "utterly refuse to sanction recourse to violence as a legitimate expression of religion" and referred to the "disturbing" violence in the Middle East. And he called religious freedom a necessity, a pointed remark in Turkey, where the Christian minority and observant Muslims each chafe in different ways against state limits on religion.

Turkish officials, too, made conciliatory if not extravagantly warm gestures. In a last-minute change of plans, Turkish Prime Minister Recep Tayyip Erdogan, who had said he was too busy to meet the pope, met him briefly at the Ankara airport before leaving for a NATO summit in Latvia and expressed "happiness" at his visit.

The yen was up against the dollar after official Japanese data showed an unexpected rise in Japan's industrial production.

It pushed the dollar down to 115.75 yen, from 116.15 yen overnight in the US.

Meanwhile, sterling was up to $1.9494 after earlier hitting $1.9545, its highest level against the dollar since December 2004.

While the Fed is expected to lower interest rates in the New Year, the European Central Bank (ECB) is predicted to boost rates for the eurozone.

Analysts said this was another factor driving the dollar down against the euro.

"The euro is becoming extremely attractive as a vehicle, a transaction, an investment and a reserve currency," said ECB council member Christian Noyer.

The ECB last raised interest rates in October to the current 3.25% level.

They have risen five times since December last year, as the eurozone economies have expanded.

With Iraqi Prime Minister Nouri al-Maliki relegated to the sidelines, brazen Sunni-Shiite attacks continue unchecked despite a 24-hour curfew over Baghdad. Al-Sadr's Mahdi Army militia now controls wide swaths of the capital, his politicians are the backbone of the Cabinet, and his followers deeply entrenched in the Iraqi security forces. Sectarian violence has spun so rapidly out of control since the Sadr City blasts, however, that it's not clear whether even al-Sadr has the authority?or the will?to stop the cycle of bloodshed.

"This is live and, God willing, everyone will hear me: We are not interested in sidewalks, water services or anything else. We want safety," an unidentified Sadr City resident said as the televised crowd cheered. "We want the officials. They say there is no sectarian war. No, it is sectarian war, and that's the truth."

Militia leaders told supporters to prepare for a fresh wave of incursions into Sunni neighborhoods that would begin as soon as the curfew ends Monday, according to Sadr City residents. Several members of the Mahdi Army boasted they were distributing police uniforms throughout Shiite neighborhoods to allow greater freedom of movement. The government announced it would partially lift the curfew Sunday to allow for pedestrian traffic.

Abdullah said the Iraq conflict was the core problem for the United States in the Middle East, but "for the majority of us living in this part of the world, it has always been the Israeli-Palestinian, the Israeli-Arab problem."
"I fear that if we do not use the next couple of months to really ... push the process forward," there will be no momentum "to create a two-state solution ... Israel and Palestine living side by side in peace and harmony," the king said.
If the Israeli-Palestinian peace process isn't pushed forward now, he asked, "do we resign this whole region to another decade or two of violence which none of us can afford?"
As for Iraq, Abdullah said he was not privy to the discussion points, but Bush and Maliki need to take some strong action because "obviously ... things are beginning to spiral out-of-control."

'We are just at the start of what we think will be a downtrend for the dollar - a tipping-point has probably been reached,' said Tim Fox, currency strategist at Dresdner Kleinwort Wasserstein, who expects sterling to hit $2 within the next three months.

The euro has been the main beneficiary. The European Central Bank is expected to continue raising interest rates into next year amid strong growth in the eurozone economies, while the Fed has left rates unchanged at 5.25 per cent since June.
'Steadily, the US dollar will decline through 2007, but probably at a faster pace in the second half of the year, as people realise the Fed is going to have to cut rates,' said Paul Mackel, currency strategist at HSBC.

Senators on Capitol Hill would like to see China allow its currency, the renminbi, to appreciate further against the dollar, making Chinese imports more expensive; but the chances are low.

"There is a historic opportunity for a Palestinian state within 1967 borders ... otherwise, there are chances of a wider confrontation."

Meshaal had been meeting Egyptian officials on the formation of a Palestinian unity government by Hamas and its rival, Fatah.

Chinese funds and expertise helped complete a nuclear power station in Pakistan's eastern province of Punjab in 1999. In April this year, the two countries said they would work together to build another such plant nearby.

There had been widespread speculation that the two countries might agree a nuclear deal similar to the one between the US and India. The BBC's Barbara Plett in Islamabad says Pakistan wants China to help it build more nuclear power reactors to meet growing energy demands, especially since the US has refused to provide Islamabad the kind of civil nuclear assistance it has promised India.

Pakistan and China have also agreed to co-produce an airborne early warning system. They already share other ventures in the defence field including the joint development of a fighter aircraft.

China has also ploughed millions of dollars into a project to build a massive shipping terminal in south-west Pakistan to gain access to the Arabian Sea. Our correspondent says Mr Hu's visit to Pakistan may have been intended to reassure his hosts over China's warming ties with Pakistan's regional rival, India.

Historically, China and Pakistan formed a bloc against India - but economic considerations are now more important than Cold War-era rivalries. Mr Hu's four-day visit to Pakistan was preceded by a landmark trip to the Indian capital Delhi, and financial centre Mumbai (Bombay) during which the two sides pledged to double trade to $40bn a year by 2010.

"This group represents a clear threat," Mr Meles said in Ethiopia's first prime minister's question time.

Some fear a regional war, as Ethiopia's rival Eritrea is seen as pro-Islamist.

The Union of Islamic Courts has denied claims by Ethiopia and the Somali government that it has links to al-Qaeda.

Some Islamist leaders want Somalia to take control of Somali-speaking areas of Ethiopia and Kenya.

US and British authorities have claimed that Syria is funding armed Sunni groups in Iraq, an accusation Syria refutes.

Syria has also been accused of allowing fighters to cross its border with Iraq and the US has claimed that Syrians make up the second-largest group of foreign fighters entering Iraq after Egyptians.

Syria says sealing the border is impossible and that Iraq must do more to patrol its side.

The US military said on Monday that between 70 and 100 foreign fighters cross the border each month.

The two governments agreed to restore full diplomatic ties and to reopen their embassies in Baghdad and Damascus and Zebari and Moallem signed an agreement in the presence of journalists.

In the document, Syria and Iraq agreed on the need for US-led forces to stay in Iraq until they were no longer needed, after which they would be gradually withdrawn.

Influential figures in Washington have urged the Bush administration to talk to both countries in hopes of gaining their help to bring the violence in Iraq under control. But many of President Bush's advisors oppose the idea.

White House policy has been to isolate Iran to compel the government to abandon its nuclear enrichment program and to refuse to talk with Syria until it drops its support for what the United States considers terrorist groups. As the debate continues in Washington, Iran has stepped forward. As the debate continues in Washington, Iran has stepped forward.

Syria has served as an entry point and refuge for Sunni Arab Muslim insurgents who have carried out a steady stream of attacks on U.S. forces and the fledgling Iraqi government since the American-led invasion in 2003.
Iran, a Shiite Muslim nation, has significant influence over the Shiite militias that have increasingly attacked Iraq's minority Sunnis.

Abaidi said Iraq's main factions, the Sunnis, Shiites and Kurds, had discussed Iran's plan and had agreed, in principle, that it was worthwhile.

Three-way talks could boost Iran's regional sway and could also put the Bush administration in the awkward position of having to acknowledge the influence of a nation it once called a member of the "axis of evil" and a sponsor of terrorism. But Nasr and Aaron contended that the initiative by Iran and Syria might also stem from broader national interests.

"All of the neighbours have a stake in this country not blowing apart or having a major civil war, because they will all get dragged into it," Aaron said.

Mr Hu arrived in the Indian capital, Delhi, on Monday evening. His four-day trip also includes a visit to the financial capital, Mumbai (Bombay).

"The purposes of my visit to India is to strengthen our friendship, increase our mutual trust, expand our co-operation and chart a course for the future," Mr Hu told reporters ahead of his talks with Mr Singh.

But rising trade between two of the world's fastest growing economies is encouraging vastly improved ties, our correspondent says. Trade between the two countries is expected to touch $20bn by next year. In the 1990s it was only about $250m.

Both India and China have produced staggering economic growth in recent years, but India continues to lag behind on many fronts, correspondents say.
China has a literacy rate of 95%, compared to India's 68%. India's exports of manufactured goods in the financial year ending this March was $71bn, compared to $713bn for China.