Greenback Slides
The U.S. dollar has slid more than 12 percent since its peak this year in March according to Bloomberg. The weaker dollar may boost America’s exports, but leaves America vulnerable to losing foreign creditors.
“It is very important to the United States that we continue to have a strong dollar,”said U.S Treasury Secretary Tim Geither.
The most useful quotes in Bloomberg’s coverage were from analysts who called the Obama Administration’s bluff. Currency traders also said that the Obama Administration’s commitment to a strong dollar has little meaning.
“It means that the U.S. approves of a constantly weakening dollar but doesn’t want a disruptive collapse,” said David Malpass, the former chief economist at Bear Sterns Cos and deputy assistant Treasury secretary from 1986 to 1989.
At the same time, the European Central Bank is also putting on the pressure for a stronger dollar according to reports from Bloomberg, The New York Times and the Wall Street Journal.
The dollar’s important role in the financial system means that investors want to see a strong dollar.
“Major reserve currency countries should take into account and balance the implications of their monetary policies for both their own economies and the world economy with a view to upholding the stability of international financial markets,” China President Hu Jintao told the G20 leaders.
The European Central Bank broke with their stringent fiscal policy, and will keep interest rates at a record low. ECB President Claude Trichet said that the ECB remains concerned that the euro’s appreciation is threatening Europe’s financial recovery.
Europe is barely keeping its head above water as the continent slowly emerges from its worst recession since World War II. A strong euro is slamming Europe’s exporters and making it difficult for their companies to compete against foreigners with cheaper costs.
