| Greenspan says U.S. economy escaping housing woes |
(Updates with Greenspan comments on dollar, background)
By Alister Bull
WASHINGTON, Oct 26 (Reuters) - Former Federal Reserve Chairman Alan Greenspan said on Thursday the U.S. economy was pulling past a sharp housing-sector downturn, and warned the dollar was being challenged as the world's reserve currency.
"We're beginning to see some move from the dollar to the euro, both from the private sector ... also from monetary authorities and central banks," Greenspan told a conference sponsored by the Commercial Finance Association.
His comments pushed the dollar down, a sign that Greenspan, who retired from the U.S. central bank in January, still holds some sway in financial markets.
The currency remarks were in response to a query on the U.S. current account deficit during an hour-long question and answer session before a packed audience of more than 1,600.
Greenspan is writing a book on his time at the Fed but has also entered the highly lucrative public speaking circuit, and is in much demand from financial market audiences around the world with a rumored six-figure price tag per appearance.
Revisiting a theme that he spoke on during his time as Fed chairman, Greenspan said "concentration risk" meant investors would eventually grow wary of adding to already heavy dollar holdings, even though returns were good.
"We'll get to the point at some point that willingness to finance it will slow, and if you can't finance it, it won't happen," Greenspan said of the broad trade measure.
If the economy remained flexible, the adjustment "should have very little effect on production and capacity," he said.
But if the United States threw up barriers to isolate itself from the turbulence of globalization, "the adjustment process could be a little bit more problematic."
Turning to the U.S. economy, he said it had gone through a very weak patch during the summer, due to an accelerating decline in housing construction and a slowing pace of inventory building. But the outlook was now "reasonably good."
"Most of the negatives in housing are probably behind us," Greenspan said. "The fourth quarter should be reasonably good, certainly better than the third quarter."
The government issues data on third-quarter economic growth on Friday. After shooting ahead at a 5.6 percent annual clip at the start of the year, the economy advanced only 2.6 percent in the second quarter as home building took a dive.
Economists polled by Reuters expect the government report on third-quarter gross domestic product to show growth slowing further to a 2.2 percent pace.
However, many analysts think growth may revive in the current quarter as lower energy prices buoy consumers.
"There are early signs of stabilization," Greenspan said of the U.S. housing market, although he added: "It's not over."
"The evidence is that we're beginning to see a flattening in statistics for sales of new homes," he continued. "The rate of construction is well below the rate of purchases."
Greenspan, who was at the Fed's helm for more than 18 years, said the U.S. was "beginning to dig into the inventories of unsold new homes."