Fate of the U.S. Dollar





"Buddy, can you spare twenty bucks?"
The recent performance of the dollar against the euro is, to put it mildly, puzzling. The US economy is flirting with recession and US interest rates are down 1.5 percentage points. So why has the dollar been so strong? Since the start of the year, the euro's value has fallen back below $0.90 from $0.95: the dollar is at a 15-year high on a trade-weighted basis.

Dollar puzzle (Financial Times 3/22/2001)



Since it would be too much to ask the U.S. dollar -- the currency of a nation that has accumulated a gaping current account deficit -- to cover the financial transactions of the entire world, we must realize that the euro, despite all its problems, is on its way toward becoming a world currency.

Euro attracts global audience as option to dollar-based trade (11/20/00)



When the U.S. economy next slows and the dollar drops, the real value of everyone's reserves will plummet, leaving the world's currencies in disarray. What has been a ravenous market for exports will dry up, leaving other states with massive overproduction and the beginnings of a deflationary crash.

Can the EU Stem the Euro's Fall? (Stratfor 10/21/2000)



The US dollar has benefited from exceptional circumstances over the past couple of years first the emerging markets crisis and second a re-rating of underlying productivity growth which have buoyed capital inflows and bloated the current account deficit. With the US economy slowing and global growth rebalancing, the financability of the C/A deficit will become the key issue for currency markets, we believe. This, together with the specific factors underpinning the yen and the euro, should lead to a sizeable correction in the US dollar.
Currencies: Restating Our Bear Case for the Dollar (Morgan Stanley Dean Witter 7/15/2000)

The world's leading private banks have warned that the dollar is still dangerously over-valued despite last Friday's intervention to boost the euro.

Banks warn on currency threat (BBC 9/23/2000)


The Soviet Union fell apart because of the inherent weakness of its statist policies; the United States may find that its decline in the world mirrors the fall of the Soviet Union, because of the unsound basis of the monetary and financial system haunted by the ghosts of those two economists, long dead: John Maynard Keynes and Harry Dexter White.

The spectres of Bretton Woods (Hugo Salinas Price December 23, 1997)