The USD has been steadily dropping in value against several international currencies such as the Euro, Australian dollar, Singaporean dollar, Japanese Yen, Indian Rupee etc.
There is a huge worrisome talk going on this issue. They say that the dollar must stop declining in value because the US is already into huge debt and fiscal pothole. Generally we believe the concerns are lesser from the US government, markets or corporations than from the out siders lot of those.
The emerging countries are blaming US to in a sense export inflation by telling that money is borrowed in USD to play in emerging mkt and commodities thus also giving boost to their currencies and subsequent loss to their exporters due to rise and strength in their currency exchange rates.
While, the USA has completely avoided to come in open and talk on such allegations; Fed chairman Ben Bernanke has at times spoke about their likelihood of stronger dollar than a weaker one. However their action does not suggest to match it. The Fed has been maintaining its policy rates to near zero since 2008.
A weak dollar helps USA exports.
Many insider and rebellious voices like us are also saying that the US is manipulating the dollar to her benefit. Such as after 2008 crisis the dollar began to rose and remained stronger, so that the US can buy/import commodities of the world at cheap rates; and now it want to target higher exports by way of weak dollar and earn more foreign exchange. It is noticeable that the US govt has set a goal of doubling its exports by 2015.
A weak dollar hurts the consumption and demand by consumers and corporations, but side by side the Fed continues to cushion by reckless lose monetary and interest rate policies. May be it is also taking lessons from its 1970 scenario where the Fed risen the interest rates to control inflation, but the back shot effect drove the economy in a recession.
Investors have now also started doubting the US bonds capacity to deliver average yields. PIMCO, the world’s largest bond fund sold all US treasuries in its 236 billion dollar fund. The CIO, Bill Gross, a renowned name, said that he expected interest rates to climb, the dollar to fall and the USA could lose its holigrail sort of AAA credit rating.
The international currency market territory, for the US will become tough when China and economies like India will step in and start taking strong decisive moves.
However, the students of economics and past budget deficit of USA knows that how Clinton reversed the deficit and debt of the largest consumer nation in the world. The USA has been successful in getting his odds in his favor at 9 out of 10 times when it has come to managing his economy and the economic consequences of the other countries of the globe. However this time is could take much time as the nature and indulgence of the crisis was more of financial nature and the US also has to answer and reason for its steps to the newly economically empowered countries of the world.
