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

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  • #61
    The weakness of the dollar is making headlines again, reviving the old concerns about the sustainability of the US current account deficit and the size of the dollar adjustment needed to correct it.

    Here are the facts: the US, the richest country in the world, consumes more each year than it produces. Its already high standard of living is being increased by net imports from abroad worth some 6.5 per cent of GDP. These imports (eg from China) are paid for in dollars, with which the Chinese monetary authorities obligingly buy US securities. So until recently US plc lived beyond its income by increasing its debt to the Chinese. Since then, Russia and other oil exporting countries in the Middle East have been buying US assets.

    How long can this go on? One school of macroeconomists argues that sooner or later these countries will grow tired of supplying manufactured goods and oil in return for paper IOUs.

    As soon as they stop buying dollar securities, the dollar will fall. This fall will make imports into the US more expensive, US exports more competitive, and hence correct the deficit. Are we witnessing the start of that adjustment?

    Perhaps, but this argument, which has been around for at least 10 years, is countered by another: the last thing that those with dollar assets want to do is provoke a decline in the dollar, since this will (a) reduce the value of their hard-earned savings, and (b) make their exports less competitive. The much-deplored global imbalances actually seem to suit everyone rather well, which is why they have persisted so long. To spearhead their rise as an industrial power, the Chinese like to produce very competitive manufactured goods. The Americans are happy to go into debt to buy those goods.

    And why not? If a high-earning individual, who also has assets worth around three times his income, decides to live beyond his means by borrowing 6.5 per cent of his growing (at 5 per cent) income, his debt will gradually build and stabilise at one-and-a-third times his income - not much given that people habitually take on house mortgages of three to four times their income.

    In the same way, America plc is currently enjoying a living standard 6.5 per cent higher than it can earn, paid for by borrowing and by selling assets. If this continues, the cumulative borrowing plus sale of assets will eventually rise to nearly half of the US's asset values.

    Would going into debt, or selling US assets, to foreigners on this scale be politically acceptable? If not, then the only remedy is a decline in the dollar. The econometric rule of thumb, according to a recent paper by Barry Eichengreen of the University of California, is that getting the deficit down from its current 6.5 per cent of GDP to, say, 1.5 per cent would require a 50 per cent fall in the dollar.

    Although this would constitute an almighty upset if it happened over a year, history shows it could easily take place over a longer period. The real dollar exchange rate declined by 47 per cent between March 1985 and February 1991.

    More recently, between October 2002 and December 2004, the dollar registered a decline of 23 per cent. It looked as though the long-awaited depreciation had started. But throughout 2005 and 2006 the US Federal Reserve put up interest rates, stopping the decline in its tracks. Many attribute the current weakness of the dollar to the possibility that US interest rates have now peaked, so the differentials that have been moving in favour of the dollar will start to move against it.

    Others say that the fall in the oil price has reduced the dollar earnings of the oil exporters, who have been the main buyers of dollar assets recently. For both these reasons, another period of dollar weakness, similar to 2002-04, may now be getting under way. But it will take a very long time to unwind those global imbalances.

    Expert view: The long, unwinding road to a dollar adjustment

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    • #62
      A weaker dollar and a receding U.S. influence

      Comment


      • #63
        Greenspan sees more declines in dollar

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        • #64
          Video:

          Former Wall Street broker, Max Keiser, investigates the US economy and reveals how the American officials have maintained the image of a strong dollar since coming off the Gold Standard. We hear from authors and leading economists who claim that central banks have been helping to manipulate the gold markets and keep the prices down.

          How will all this unravel? Max looks at the current U.S. debt levels, the shift away from the dollar as a reserve currency and the move to price oil in Euros:


          People And Power: Death of the Dollar

          Comment


          • #65
            A currency in decline: How dangerous is the dollar drop?

            Comment


            • #66
              There are plenty of big economic questions that will be answered in 2007. Will there be a global trade deal? Can the German economy shrug off the impact of higher taxes? Can China continue to grow at 10% a year? Will oil prices stay high or come crashing down? But they are all sideshows to the main event. The really crucial question for 2007 is whether it is the year when there is a run on the dollar. There are plenty of people out there - me included - who think the US currency is going to take a beating over the next 12 months.

              Here's why. Over the past decade, the dollar has had two big strengths. Firstly, it has been the world's only reserve currency: secondly, its economy has grown far faster than its two big rivals in the developed world - Europe and Japan. Neither of these factors is now as powerful as it was even a couple of years ago, the last time the dollar had a real wobble on the foreign exchanges.

              The advent of the euro has meant foreign investors now have a choice of currencies in which to hold their reserves. To be sure, they will still continue to stash away plenty of greenbacks, but the balance is likely to change over the year. Iran's announcement that it was diversifying its portfolio was clearly a political shot across Washington's bows, but it was significant nontheless. Central banks around the world no longer have to load up on dollars simply because there is no alternative; the euro is one, the Chinese yuan will soon become another.

              As far as the economy is concerned, the strong dollar has allowed the US to live beyond its means for far longer than has been healthy either for America or the global economy as a whole. A high dollar meant exports into the US were cheap, and that kept both inflation and interest rates low. Easy credit terms meant that the US has had not one but two speculative booms over the past decade, the first in dot com shares, the second in the housing market. Growth has been artificially boosted and the trade deficit has exploded.

              Now, though, things have started to change. The US economy has slowed down markedly during 2006 as the housing bubble has collapsed and the eurozone has put in a decent performance for a change. The move from dollars to euros is perfectly rational when looked at on economic grounds.

              A word of caution here. Those who write off the US economy do so at their peril; it is resilient and has had more comebacks than Frank Sinatra. It could well be that the world's biggest economy does rather better in 2007 than the pundits think.

              What is worrying, though, is that even after falling by around 30% in the last two years the dollar still looks over-valued. The hope is that there is a controlled depreciation of the US currency that leads to a rebalancing of the economy and a lower trade deficit. But financial markets don't always work in that way. Financial markets are skittish. They get jittery. They are prone to bouts of panic. And if the dollar's fall turns into a crash - as it might well - the outcome would be higher interest rates and a collapse of consumer demand in the US, the end of export-led growth in Europe and Asia, and a world economy on the brink of the precipice.

              Is the dollar doomed?

              Comment


              • #67
                ABU DHABI: The United Arab Emirates plans to convert 8 percent of its foreign-exchange reserves to euros from dollars before September, the latest sign of growing global disaffection with the weakening U.S. currency.

                The U.A.E. has started, "in a limited way," to sell part of its dollar reserves, the governor of the country's central bank, Sultan Bin Nasser al-Suwaidi, said in an interview. "We will accumulate euros each time the market appears to dip" as part of a plan to expand the country's holding of euros to 10 percent of the total from the current 2 percent.

                The Gulf state is among oil producers, including Iran, Venezuela and Indonesia, looking to shift their currency reserves into euros or sell their oil, which is now priced in dollars, for euros. The total value of the reserves held by the U.A.E. is $24.9 billion, Suwaidi said.

                The dollar has fallen more than 10 percent this year against the euro.

                Part of the reason for the decline is the outlook for slower U.S. growth, which makes the dollar a less attractive investment.

                But fears that the dollar's level is unsustainable because of the heavy indebtedness of the United States to other countries is also behind the weakness this year, analysts said.

                The shift to euros underscores its growing role as a reserve currency nearly eight years after its establishment. Central banks often keep the details about their currency holdings a secret.

                The move by the U.A.E. central bank "is hard evidence that diversification is happening," said Shaun Osborne, chief currency strategist at TD Securities in Toronto. "This is negative for the dollar in a broad sense as it reflects falling confidence in the currency."

                Central banks in Russia, Switzerland and New Zealand are also diversifying away from the dollar and into yen after the Japanese currency reached a 10- month low against its biggest trading partners in October.

                Gulf Arab energy producers will earn as much as $500 billion from oil sales this year, the International Monetary Fund forecasts. The region's central bank reserves represent a fraction of the currency holdings of state-owned investment firms like the Abu Dhabi Investment Authority, which is estimated to have more than $500 billion under management.

                But the signal that such a move sends to financial markets is a negative one.

                "It is a recognition of the vulnerability of the dollar over the coming year," Simon Williams, an economist with HSBC Holdings, said by phone from Dubai.

                The euro rose to $1.3123 from $1.3098 after Suwaidi's comments were published Wednesday.

                "This is not confined to the U.A.E. There's a general awareness across the Gulf of the benefits of diversifying currency holdings," Williams said.

                The U.S. current account deficit widened to $225.6 billion in the third quarter. Oil producers in the Middle East and Central Asia will run a surplus of $322 billion for all of 2006, according to the International Monetary Fund.

                Total foreign holdings of U.S. Treasury securities — which generally support the dollar — increased to a record $2.16 trillion in September, just under half of the $4.34 trillion outstanding.

                U.A.E. to sell dollars for euros

                Comment


                • #68
                  The euro has displaced the US dollar as the world’s pre-eminent currency in international bond markets, having outstripped the dollar-denominated market for the second year in a row.

                  The data consolidate news last month that the value of euro notes in circulation had overtaken the dollar for the first time. Outstanding debt issued in the euro was worth the equivalent of $4,836bn at the end of 2006 compared with $3,892bn for the dollar, according to International Capital Market Association data.

                  Outstanding euro-denominated debt accounts for 45 per cent of the global market, compared with 37 per cent for the dollar. New issuance last year accounted for 49 per cent of the global total.

                  That represents a startling turnabout from the pattern seen in recent decades, when the US bond market dwarfed its European rival: as recently as 2002, outstanding euro-denominated issuance represented just 27 per cent of the global pie, compared with 51 per cent for the dollar.

                  The rising role of the euro comes amid growing issuance by debt-laden European governments. However, the main factor is a rise in euro-denominated issuance by companies and financial institutions.

                  One factor driving this is that European companies are moving away from their traditional reliance on bank loans – and embracing the capital markets to a greater degree.

                  Another is that the creation of the single currency in 1999 has permitted development of a deeper and more liquid market, consolidated by a growing eurozone.

                  This has made it more attractive for issuers around the world to raise funds in the euro market. And, more recently, the trend among some Asian and Middle Eastern countries to diversify their assets away from the dollar has further boosted this trend.

                  René Karsenti, executive president of ICMA, said: “It is the stable interest rates in Europe that have helped and the fact that [the euro] has strengthened and shown resilience.”

                  Since the start of 2003, the European Central Bank’s main interest rate has fluctuated only 1.5 percentage points, ranging from a low of 2 per cent in the middle of that year to 3.5 per cent, its rate today.

                  In comparison, the Fed funds rate, the main US interest rate, has fluctuated 4.25 percentage points, ranging from 1 per cent in the middle of 2003 to 5.25 per cent, its level today. The euro has also risen to trade around $1.30 against the dollar, from around parity three years ago. Sterling issuance has grown in the past three years, reinforcing its attraction as a niche currency among some investors. The yen, in comparison, has fallen out of favour.

                  Overall, international capital markets have doubled in size in terms of bond issuance during the past six years.

                  Euro displaces dollar in bond markets

                  Comment


                  • #69
                    Kuwait, the third-largest Arab oil producer, may abandon the dinar's peg against the dollar in favor of a basket of currencies to help minimize economic harm after the dollar declined.

                    "We might go to a basket for an interim period,'' Bader al- Humaidhi, Kuwait's finance minister, told reporters today at the World Economic Forum in Davos, Switzerland. "The dollar fell a lot against the euro last year, but if we'd been linked to a basket we wouldn't have suffered'' as much.

                    Al-Humaidhi declined to comment on which currencies might be in the basket. A switch from the dollar is being studied by Kuwait's central bank, he said. The Kuwaiti dinar rose to 0.28915 against the dollar as of 4 p.m. in London, from 0.28920 yesterday, according to Bloomberg data.

                    Dollar reserves are being replaced with euros by oil producers including the United Arab Emirates and Venezuela. China, which has the world's largest foreign-exchange reserves, and Indonesia say they plan to increase euro reserves and Iran says it's boosting oil sales priced in euros.

                    The dollar has declined 5.2 percent against the euro in the past 12 months. The currency traded at $1.2955 against the euro at 12:47 p.m. in New York from $1.3026 yesterday, when it reached a two-week high of $1.3044.

                    Currencies undervalued

                    Most of the currencies of the six Gulf Arab states, including Saudi Arabia and Kuwait, are undervalued against the dollar, based on their current-account balances, inflation and costs of goods and services, Deutsche Bank AG said in a report this month.

                    "Without the peg, Gulf currencies would have appreciated in the past couple of years because of the increase in oil prices,'' thus boosting the cost of imports, Standard Chartered Plc economist Monica Malik said in a telephone interview today from Dubai. "Instead they weakened against other major currencies owing to the dollar.''

                    The six Gulf Arab states earned as much as $500 billion from oil sales last year, according to the International Monetary Fund. About two thirds of that amount is likely to be invested in overseas savings and investments in countries including the U.S.

                    The U.S. needs to attract about $2.5 billion a day from foreign investors to keep the dollar steady and fund a current- account deficit that widened to a record $225.6 billion in the third quarter of last year.

                    G-7 urge float

                    Kuwait in 2003 became the last of six Gulf Arab monarchies including Saudi Arabia to peg its currency to the dollar in readiness for a single currency planned for 2010.

                    The Kuwaiti dinar is trading at the top of a 3.5 percent permitted band set when the dollar peg was established in January 2003.

                    Kuwait central bank governor Sheikh Salem Abdul Aziz al- Sabah last month said he may decide to widen the range or change the peg if the U.S. currency continues to weaken and threatens domestic growth.

                    The Group of Seven industrial nations, including the U.S., Japan, Germany and the U.K., in April urged countries with current-account surpluses to allow their currencies to appreciate to help adjust global imbalances.

                    "I don't think other Gulf countries are going to adjust their pegs,'' Dorothee Gasser, a Middle East and Africa economist at ING Bank NV in London, said in a phone interview today. "What we are likely to see is that they are going to convert some of their reserves into gold. It's bearish for the dollar.''

                    Single currency

                    Crude oil futures in New York reached a record on July 14. They have since fallen because of rising stock piles in the U.S. and receding security concerns in oil producing nations. Oil at around $55 a barrel is still almost three times higher than five years ago.

                    Kuwait remains committed to a single currency for the Gulf states, al-Humaidhi said today. "The 2010 target is still the same. I hope we can meet it,'' he said.

                    Kuwait may abandon dollar peg to protect its economy

                    Comment


                    • #70

                      LONDON (Reuters) - Oil-rich Gulf Arab estates are seen shifting their assets away from the United States, and Qatar is keen on customer states including Asia and Europe as destination, the country's financial regulator says.

                      Middle Eastern countries have been scaling back its once near full reliance on U.S. assets in recent years to minimize risks and enhance returns as they diversify the massive windfall from oil and gas revenues.

                      "Regionally there is less evidence of enthusiasm to be the major owner of U.S. assets. It doesn't mean U.S. investments will go away but you will find governments and agencies looking at a wider range of opportunities," Phillip Thorpe, chairman and chief executive officer of Qatar Financial Center Regulatory Authority, told Reuters in an interview this week.

                      "For Qatar it's clearly the case they are enthusiastic to assets in its customer states - follow the gas. Where is it going? That's good place to buy as you are offsetting some risks by buying their assets," he said in the ski resort of Davos where more than 2,400 business leaders and politicians are gathering.

                      Thorpe said by 2012, the broad breakdown in Qatar's energy customer base would be around one third the UK and Europe, one third Asia and the rest the United States.

                      "So it's very broadly diversified."

                      The economy of Qatar, which has a population of less than 1 million and is home to the world's third largest gas deposits, has tripled since 1998, making it among the world's fastest growing economies.

                      The economy was expected to grow around 8 percent last year and inflation slightly easing to 6 percent.

                      Property prices and rents have surged in several Gulf Arab nations in recent years as the region's economies flourished on high income from oil exports.

                      "In terms of overall economic growth it's been running double-digits. The evidence of stress is in inflation but there is no sign of other chronic problems that are rising," Thorpe said.

                      "A lot of it is because the government is using the windfall of oil... very cleverly which is helping to mop up some of the liquidity."

                      Oil and gas are believed to accounted for about 65 percent of the country's GDP and 87 percent of its exports.

                      Comment


                      • #71
                        The dollar fell against most major currencies Thursday after a U.S. government report showed net capital inflow tumbling in December, suggesting foreign securities are attracting investors.

                        The dollar bought 119.33 yen mid-afternoon Thursday, down from 120.79 yen late Wednesday in New York. The euro rose to $1.3150 from $1.3123.

                        However, the British pound slipped to $1.9446 from $1.9618.

                        According to the Treasury Department report, net foreign acquisition of long-maturity U.S. securities fell to $15.6 billion in December, down 82 percent from $84.9 billion in November. Meanwhile, the U.S. trade deficit was reported at $61.2 billion.

                        Though it reflects economic activity over the last couple of months, the report likely will catch blame if the dollar continues to weaken, said David Solin, a partner at Foreign Exchange Analytics in Essex, Conn.

                        "The big question going forward is whether this is the start of a bigger trend," Solin said.

                        China has indicated interest in diversifying its U.S. holdings, but is savvy enough not to turn around and liquidate its dollar-based assets, Solin said. Newly accumulated Chinese assets could be diversified into foreign currency in the future, he said.

                        A report showing Japan's economy grew faster than expected in the fourth quarter sent the dollar to a one-month low against the yen.

                        The yen jumped after the government reported Japan's October-December gross domestic product expanded at an annual pace of 4.8 percent. The dollar sank at one point to 119.77 yen, its lowest since Jan. 11.

                        "Players have been looking for an excuse to adjust their heavy dollar holdings," said Satoshi Tate, a senior trader at Mizuho Corporate Bank. "The unit will remain weak (against the yen) until the Bank of Japan's policy-board meeting."

                        The Bank of Japan's key interest rate stands at 0.25 percent, and the central bank has pledged to tighten policy as the economy recovers. But most currency players don't expect a rate hike, and they speculate that the dollar will resume an upward trend after the meeting.

                        On Thursday, Federal Reserve Chairman Ben Bernanke, testifying before Congress for a second day, tempered his expectations for moderate growth and easing inflation, saying future interest rates will depend on economic data.

                        The central bank has kept interest rates unchanged at 5.25 percent for the last five meetings following a more than two-year string of interest rate hikes that boosted the dollar.

                        Higher interest rates, a weapon against inflation, support a currency by making some assets denominated in that currency more attractive to investors.

                        In other trading, the dollar bought 1.2333 Swiss francs, down from 1.2401 late Wednesday, and 1.1623 Canadian dollars, down from 1.1650.

                        U.S. dollar falls against euro, yen

                        Comment


                        • #72
                          · Fears over Chinese and U.S. economies trigger slump

                          · Losses wipe out year's gains on main indices

                          Wall Street suffered its biggest one-day fall yesterday since the immediate aftermath of the September 11 terrorist attacks, as a day of hefty stock market falls around the world culminated in a late panic sell-off in New York.

                          The Dow Jones industrial average closed more than 400 points down amid fears that the US and China - the twin locomotives for the global economy - were about to plunge into recession and that the White House might be preparing air strikes against Iran's nuclear capability.

                          At one stage, the savage mark down of equities on Wall Street left the Dow down 550 points, but a partial recovery meant that at the closing bell the average of blue chip stocks finished 415.86 points lower at 12,216.40.

                          The one-day loss more than wiped out this year's gains on the stock market for the Dow and New York's two other main share price indices - the S&P 500 and the Nasdaq - and was the biggest drop since September 17 2001, when trading recommenced six days after terrorists flew two planes into the World Trade Centre. Wall Street went into retreat at the start of yesterday's trading, and was 200 points lower by lunchtime in New York. It dropped sharply during the afternoon, with the late flurry of selling coming too late in the day to trigger the automatic circuit breakers designed to calm the markets.

                          Oil prices, which earlier had climbed to more than $62 a barrel in early New York trading, later dropped back to close a dollar lower at just over $60 on concerns that the decline of almost 8% in US durable goods order announced in Washington yesterday was evidence that higher interest rates had finally taken their toll.

                          Despite news yesterday of a modest pick-up in sales of existing homes, yesterday's mini-crash was also blamed on the exposure of the US financial sector to subprime mortgages, a high-risk form of home loan that proved lucrative when the housing market was booming. The latest figures show that the price of existing homes in the US in January was 3.1% lower than a year earlier.

                          Bond prices rose as dealers sought a safe haven from the turmoil in the equity markets. Thomas Metzold, vice-president of Eaton Vance in Boston, said: "Only time will tell if this is a correction or more. But I feel we had gotten the point of feeling that risk was nonexistent and maybe people have finally gotten a wake-up call."

                          Earlier, a day of turmoil on the world's bourses from Hong Kong to Buenos Aires began with a fall of almost 9% in Shanghai, with the biggest drop in China's stock market in almost a decade blamed on hints from Beijing that action was being planned to combat the speculation that this week drove share prices to record highs.

                          Chris Low, economist at FTN Financial in New York said: "What is striking to us is not the big move in Chinese stocks, but the contagion driving stocks down around the world. For the past couple of years, contagion was a thing of the past.

                          The FTSE 100 closed almost 150 points down on the day at 6,286.1, with the fall of 2.31% the sharpest since last June. The FTSE 250 suffered its biggest one-day points fall, dropping by 431.5 to 11,180.9. The Nikkei dropped 0.52% to 18,119.92 after the yen's strength gave investors a reason to sell some exporters' shares. The FTSEurofirst 300, the pan-European index, dropped 2.8% to close unofficially at 1,507.06, its biggest one-day percentage loss since May 2003.

                          Foreign exchange markets were also thrown into turmoil by a jump in the yen. Investors have made big profits in recent years by borrowing money cheaply in yen and buying higher-yielding but riskier assets elsewhere. An unwinding yesterday of these so-called "carry trades" led to a 2% decline in the value of the dollar against the yen - its biggest drop in a year. The dollar also lost ground against the sterling, with the pound ending the day in London little more than three cents away from the $2 level.

                          The ripple effect reminded some of the retreat in global markets of May 2006. "There's near-term vulnerability a la May 2006 because of the sheer amount of risk that is on board across the world," said Jim O'Neill, chief global economist at Goldman Sachs.

                          Explainer: Carry trades

                          · Currency carry trades involve an investor borrowing money in a currency where interest rates are low and buying assets in a currency where they are high.

                          The amount investors make on the deal depends on the riskiness of the asset they buy and the amount they are prepared to borrow to boost their initial investment. Evidence suggests that many investors have plumped for high-risk plays and dangerously magnified their exposure through borrowing.

                          In recent years, the prime target for the carry trade has been the Japanese yen, because a decade of deflation has forced the authorities to keep interest rates at zero. Even now, the official cost of borrowing is under 1%, compared to more than 5% in Britain and America.

                          The carry trade is not a one-way bet, however. The main risk comes from movements in exchange rates: if the yen goes up against the dollar, paying back the original borrowing becomes more expensive and can wipe out the profits of an investor who has borrowed heavily to fund the trade.

                          Comment


                          • #73
                            Originally posted by Al-khiyal View Post
                            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


                            umm.. no comprendo. is this saying that the high cost of items here in america (like gas, school, etc) are nothing compared to over seas? huh? heck prices are rising and i just don't see the threshold... and what does more interest have to do with the altered value of the dollar?


                            never mind. i never understood economics anyways
                            It seems as if one fails to conceive
                            The meaning my name strives to achieve

                            To a biological form you cannot relate-
                            Because a reproductive cell is a gamete not gamate!

                            It means to unite, -to become consolidated
                            So without me in a.com, is there hope we'd be amalgamated?

                            Comment


                            • #74
                              salam ya amalgamate,

                              It just means that people coming to the U.S.A. will get a better rate when they are converting currency, so they will have 'more to spend'. Some items that you might consider expensive - e.g. gas - are actually a lot cheaper in the U.S. than in other countries.

                              re: Interest rates, if foreign banks offer a better rate of return on deposits, that's where investors will put their money. With a weak dollar why invest to 'get more dollars' when dollars are becoming worth less?

                              Comment


                              • #75
                                Gulf economies will move away from a dollar currency peg and shift foreign exchange reserves away from dollar to other currencies, including the Chinese yuan, the chief executive of Dubai International Financial Centre (DIFC) has said.

                                Nasser al-Shaali noted that the UAE central bank had already started buying euros - part of its strategy to move about 10 per cent of its reserves into the single European currency before the end of the year.

                                "We've seen, for example in the case of the UAE central bank, a movement into the euro," al-Shaali told the Reuters Middle East Investment Summit.

                                "In the future, most likely, we predict some of the economies in the region will adopt the Chinese yuan currency as well," he said, noting that he was not aware of that happening at the moment.

                                He said the appetite of the region as a whole was to increasingly diversify exposure.

                                "The investment strategies of Dubai Holdings entities, Kuwait Investment Authority and so on ... you will see a lot of these bodies start looking at Eastern Asia more aggressively along with a lot of institutional and private investors in the region," he said.

                                Saudi Arabia, the largest Gulf Arab economy, as well as Qatar, Oman and Bahrain have ruled out changes to their dollar pegs, adopted in preparation for a monetary union planned for 2010.

                                But the UAE and Kuwait, the third largest economy, have questioned the peg after the dollar fell about 10 per cent against the euro last year.

                                A Reuters poll of 15 analysts last week showed Gulf Arab states will probably not meet the deadline for currency union as member nations grapple with inflation and budget criteria, but Kuwait may revalue its currency before then.

                                Twelve of the 15 analysts, surveyed between March 16-20, said it was unlikely or very unlikely that the six members of the Gulf Corporation Council (GCC), representing the world's biggest oil exporting region, would meet its single currency target in three years.

                                Comment

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