U.S. dollar starts the big slide against major currencies

[Al-khiyal]

THE dollar has embarked on a big decline that will see it fall against all leading currencies, according to analysts.

The plunge is being prompted by America’s $800 billion (£438 billion) current-account deficit, they say.

The dollar has been under pressure following last weekend’s meeting of G7 finance ministers and central bankers, which emphasised “global imbalances” and said currencies should reflect economic fundamentals. Then China raised its key interest rate to 5.85%, its first hike for months, and Ben Bernanke, the new Federal Reserve chairman, hinted that American rates would pause at 5% after a rise in May.

Analysts say that without interest-rate support, the dollar will be weighed down heavily by America’s imbalances.

“I think this is it,” said Tony Norfield, global head of currency strategy at ABN Amro. “The dollar has been supported by high yields but markets are saying that is no longer enough. The question for policymakers is going to be how to manage the dollar’s decline. It won’t be a one-way street but the fall is likely to be biggest against Asian currencies......”

More.....

[Theja]

Generally, Americans have the indulging habit of spending beyond their means and surviving on credit --- which in a way also create another form of economy altogether, as the spending enable many businesses to keep booming and retaining or adding employment.

Feeding into this habit is the nations of the world putting their money into America for investment opportunities. While berating the spending habit of Americans, many global investors also realize that America need to be propped up for other nations to keep making money. For example, its as if China has said "its my turn" and making a fast go at it, as the gross trade imbalance in china's favor shows.

As the Dollar slides, export and tourism will benefit the most, benefitting a section of American business.

However you cut it, America has become the global engine for the world's economy. No wonder America cannot afford terrorists to hold its interest hostage, here or around the world.

[Al-khiyal]

For two weeks, the dollar has been hammered as foreign buyers shun the US currency.

As a result, the Canadian "loonie" is at its highest point in 30 years. The British pound is at its uppermost level since last September. Even the closely managed yen is at a six-month peak.

If the dollar were to continue falling, it could have wide ramifications:

• It could imperil the economy next year because Fed Chairman Ben Bernanke might have to defend the currency with higher interest rates.

• A lower-valued dollar makes imports more expensive, possibly ratcheting up the inflation rate. But it could also stimulate US exports, thus providing more jobs.

• This summer, Americans traveling abroad will feel as if everything is expensive. However, foreigners coming to America will feel as if the country is one giant Wal-Mart.

Behind the falling currency is a changing global economy. As the US Federal Reserve appears to be near the end of its round of interest-rate hikes, foreign banks are starting to hike their rates - which puts foreign currencies in higher demand, thus making the dollar less attractive. Thursday, in fact, the president of the European Central Bank indicated that rates could rise in Europe next month. At the same time, the giant US trade imbalance has produced a huge outflow of dollars to other countries, as well as the need to finance the ever-bigger US deficit. The deficit has attracted increasing scrutiny, most recently at a meeting of finance ministers in Washington last month.

In addition, the central banks of some foreign countries, which are key in financing the US deficit by buying US Treasury bills, are now less willing to do so. Instead, they're diversifying their reserve holdings with euros and yen.

"We seem to have reached a crossroads," says Anthony Chan, chief economist at JPMorgan Private Client Services in Columbus, Ohio. With foreign interest rates on the rise, he says, it will become harder to finance the US current account deficit.....

The fallout from a falling dollar

[sania]

Generally, Americans have the indulging habit of spending beyond their means and surviving on credit --- which in a way also create another form of economy altogether, as the spending enable many businesses to keep booming and retaining or adding employment.

Feeding into this habit is the nations of the world putting their money into America for investment opportunities. While berating the spending habit of Americans, many global investors also realize that America need to be propped up for other nations to keep making money. For example, its as if China has said "its my turn" and making a fast go at it, as the gross trade imbalance in china's favor shows.

As the Dollar slides, export and tourism will benefit the most, benefitting a section of American business.

However you cut it, America has become the global engine for the world's economy. No wonder America cannot afford terrorists to hold its interest hostage, here or around the world.

That means the nations of the world cannot afford the terrorists
to hold the interests of USA as hostage!

Coz, if the engine looses energy, sputters & slows down,
the economies of the world will also go into a tailspin of depression!

[Al-khiyal]

Brazil, Russia, India and China, referred to as BRIC group that currently manifests the world's highest economic growth rate, have surpassed G7 countries in their forex /gold holdings for the first time in history.....

BRIC nations surpass G-7 in forex, gold holdings

[Theja]

Let's hope all the nations eventually become economic powers.

The US which is only a little over two hundred years old as a Sovereign nation has gotten ahead of the rest in the economic race.

As more nations join in the economic success, wider markets will be created for American products and services to circulate. Of course, these nations will find opportunities in the American market.

Now some Americans are finding jobs in India.

[sania]

Yes, the Indian corporates have grown, matured & become multinationals,
they have started employing foreigners in India.
Though very few, in CEO levels.

The FOREX reserves of India is bulging at US $ 200 billions,
and growing fast.

The GDP growth rate is 8% for FY 2005-06.
Our PM has told that we are aiming at 10 % growth rate next year.

The big drag is the high price of crude.