VIEW FROM THE GROUND FLOOR: Europe's weakness as an investment powerhouse is reflected in the lack of vigour in the euro's rally

It's a long time since any of my trader friends have felt nervous about holding US dollars but they're beginning to feel edgy about it now.

None of them had the slightest urge to sell the currency over the past couple of years, even though the pundits were telling them that it was overvalued against the euro, but slowly their view is beginning to change. Now it appears the tide is turning against the buck, not least because the market isn't convinced that the Treasury Secretary, Paul O'Neill, is a supporter of the strong dollar policy so loved by his predecessor.

Last week in his testimony, O'Neill said that the US needed to "create conditions for prosperity regardless of FX moves". Which is fair enough but not really what dollar bulls wanted to hear and has led to many foreign exchange dealers deciding that the Treasury's position on the dollar has changed. In which case their position might change too.

It would, of course, suit American businesses to see the dollar a bit lower - they've been complaining for a long time that cheap foreign imports are hurting their industries. And the upside for Europeans, in particular, has been that the dollar's strength has made our exports to the US look so attractive.

But the American habit of buying so much more from overseas than they sell has meant an ever-increasing trade deficit. That deficit must now be starting to worry policy-makers.

Until recently it didn't really matter, because the US was attracting huge inward investment anyway. Even though American money was flowing out of the country on imported goods, it was flowing right back again for as long as the world considered the rewards for investing in US companies to be high. So, while ordinarily the dollar would have fallen, the weight of inward investment meant that it retained its value and the deficit grew.

At the moment the current account deficit is around $30 billion a month but it looks like net foreign purchases of US assets is well below the amount needed to fund it. Which, ultimately, means that the dollar will have to fall. But, like everything, there's nothing to say that it has to fall in a straight line and I expect to hear lots of calls about the demise, rebirth and demise of the dollar before the year is out. Bottom line, though, is that the dealers think it'll be lower in December and it's difficult to bet against that.

It says a lot for how poorly Europe is regarded as an investment powerhouse that the euro hasn't taken the bit between the teeth and rallied strongly. As always, whether on the upside or the downside, it's really the US currency calling the shots and Europeans are only bit players. Investors might be hanging round on the sidelines but they're not pouring money into European businesses either, which is a very depressing scenario.

Actually many are losing some of their enthusiasm for economic recovery whether in Europe, Asia or the States. It's difficult to blame them - a lot of the recovery seems to me to have been wishful thinking. Sure, consumers were still spending, but industry wasn't. The Nasdaq is still trading like a leaky ship; the Dow looks equally rocky and corporate bonds - which had been picking up a bit - are beginning to look doubtful again. Although a lot of the blame for that must go to the dreadful telecoms sector, which seems to hit investors in their pockets no matter what way they look.

The sad thing about the telecoms industry is that it still has so much potential, but companies burdened themselves with so much debt in order to buy overpriced assets that it's hard to know when they'll finally come out from under the cosh. All of the high-flyers are now scraping along the bottom and (finally) the markets are waking up to the fact that doing well in the good times is not the mark of a great chief executive; doing well in the bad times is what counts. Unfortunately, none of them are doing very well!

I get really mad when I hear people like Iain Vallance, the retired chairman of BT, pontificate on the over-investment and high prices paid by the industry in the past. I guess that at the time everyone wanted a piece of the action but people like Vallance were being paid to realise when the action was getting too hot. None of them did, even though everyone (other than the telecoms industry itself) was horrified at the prices being paid for 3G licences when they were being auctioned.

I came face to face with the digital downturn myself last week when I was visiting Belfast and went to switch on the news in the hotel bedroom. A polite notice from the general manager informed me that the hotel had been a subscriber to ITV Digital and therefore television news was not an option. In fact this wasn't really a bad thing because it meant that I listened to the radio news instead (which is always much better) and managed to get ready for dinner in time because I didn't keep stopping to look at boring graphs of the Dow.

Every time I go to Belfast I eat in a different restaurant. Last week it was the excellent Shu, which is the usual fusion sort of cooking (a cooking style I like), dark wood décor and view of the kitchen.

One day the trend for the dark wood décor will change, which will no doubt be an investment headache for restaurants everywhere.

Still, all they have to do is stick to providing good food and people will come all the same. It's when (like the telecoms sector) they forget why people use their services in the first place and concentrate on the wrong things that they end up in trouble.

One of my dining companions worked for the mobile phone company, Orange, but he wasn't letting the downturn in the sector ruin his meal. In fact he was still enthusiastic about the industry although he winced when he heard that I held a few France Telecom shares.

France Telecom owns Orange - in fact buying Orange at the top of the market is one of the reasons why the shares look so horrible on my spreadsheet. Naturally I should've sold them months ago but not sitting in front of a dealing screen every day means that I keep forgetting.

Just as well I wasn't paying for dinner!