Dollar falls to multi-month lows

"LONDON (Reuters) - The dollar slid sharply to its lowest point in three months against the yen and seven months versus the euro on Monday after the Group of Seven said at its weekend meeting in Washington that China should let its yuan currency appreciate as a way of fixing global imbalances.

The yen climbed around one percent against the dollar and the euro, which gained additional support as comments from Qatar and Russia added to speculation that central banks are shifting their reserves away from the dollar.

However, the yen's rally stalled slightly after Japan signaled its displeasure at the rapid move when Vice Finance Minister Koichi Hosokawa said he was watching forex moves with "strong interest" and would take appropriate action on forex as needed.

"The G7 meeting highlighted the dollar's vulnerability to concerns about global imbalances," Bank of America currency strategist Kamal Sharma said.

Finance ministers of the world's biggest economies called for major exporting nations to allow their currencies to rise against the dollar to help resolve the imbalances, highlighted by the massive U.S. trade deficit and China's large surplus.

"This is the fist time since 2003 that G7 has bought in new language with significant implications for the foreign exchange market. It shows the importance they attach to global imbalances...and the urgency among policymakers to deal with this issue," said David Woo, head of currency research at Barclays Capital.

But some analysts said the effect on the dollar may be limited as Chinese officials have made clear they will reform the yuan at their own pace and the G7 stopped short of laying out concrete action to tackle trade imbalances."

http://money.cnn.com/2006/04/24/mark...reut/index.htm

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Classic American liberal

There are too many dollars and dollar-instruments out there in the world for the size of the U.S. economy. This means that in fact the U.S. dollar is greatly OVERVALUED and has been for a long time. What has kept the value up was supply and demand (foreigners and foreign nations alike wanted to hold dollars as they were almost the international money).

Now, with a combination of no cold war, massive domestic U.S. deficits and debt, massive trade imbalances, and alternatives like the Euro available, the dollar is gradually deflating. We should hope it continues this way, slowly but steadily, for a long time. That's because there is only two otheralternatives. The first alternative is a massive turn-around in the U.S. economy; unfortunatey, globalisation and the primacy of corporate capitalism in the United States makes this virtually impossible.

The other alternative would be a sudden crisis and a sharp decline in the value of the dollar. One scenario would be if a nation like China with large dollar reserves dumped them onto the world market and sparked a massive panic sell-off. Oil would suddenly be traded in Euros rather than dollars and the cost of U.S. borrowing would soar because of the changed exchange rates with other nations. This would probably trigger a world-wide recession due to a depression in the American economy caused by the crisis (a lose-lose scenario for sure).

I know this sounds very apocalyptic, but it is actually a real concern.

You're really pickin' aren't ya? The economy is doing so well....you guys have to resort to stuff like this in your efforts to smear.

Sad.

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"This is a time for a national imperative not to fail in Iraq." Condoleeza Rice, January 11, 2007

We are like blood brothers. China is carrying billions of our treasury notes. A sharp decline would lead them to lose billions in value, plus their export goods would become very expensive, leading to an economic decline.

Regardless of what you think, the economy is not OK. The Dollar is declining ... I get less Shekels for it than I did just a month ago .. and it hasn't stopped yet. It will go down even more.

With that said, it might be the best thing for the US. Weak $ meens better export potential for US goods. The World is flat so it will move towards equilibrium. Having one currency strong while another is weak leads to things like imigration between Mexico & the US, or outsourcing jobs to India. But eventually all evens out ... equilibrium.

But then there's China. Why would China stockpile all these T bills if they don't plan on dumping them ?! Why would they peg ther currency ?! China is not the US's friend. They will dump those bills when they have chewed through the US economy. They are not playing in a free market economy .. they are using n abusing it. When the US signed that free trade agreement they signed a deal with the devil.

But bottom line ... The US $ is devaluating. I got 4.73 shekels for it in January and now I'm lucky to get 4.50

I really should change my cash savings from dollars to euros. Their total value has declined with the dollar, while the euro has been stable enough.

It was only a question of time the dollar fell, it was way too high for far too long, the question now is how far will it fall.

I agree that China should never be considered a friend. My point is that China is holding our notes, and if our notes go bust, they are busted too.

There is a theory that economic indebtedness will preclude war. I hope this holds true with China.

It’s going to keep on falling, not continuously, there will be some peaks, but if you look at the larger picture in a few years, you’ll see a devaluation. Trust me.

Allow me to explain a thing or two, in the old days money was worth as much as the substance it was made of, usually gold or silver, later on central banks emerged and with their emergence came the concept of “non intrinsic value” The value of a 100 dollar bill is not the same as the paper on which it is printed, it’s much more, the value is what you believe it is. It’s a matter of trust. We are living in an economy built on trust in fact.

Usually the central bankers determine a value, although other factors are relevant too. Usually a percentage of the value is stored in the form of gold in huge central bank vaults, this is often a percentage of the currency circulating.

In recent years, the ratio gold/value has become weaker. Today, roughly 20% of the Dollar’s value is purely built on trust. Banks and consumers holding dollar reserves trust the FED when the FED determines a value.

However, since the US financial situation is getting out of hand, more and more people are losing their trust, not yet in massive numbers, but still if you read financial papers you’ll come across news regularly that financial institutions and foreign central banks are decreasing their Dollar reserves and exchanging them for gold, euros or alternative currency. I’m confident most of you have noticed this trend.

This is a trend which will go on and on as long as the US keeps spending like it was the 90’s, it’s not, things will most likely NOT get better, and China and India won’t disappear from the face of the earth and a military confrontation with Iran will have a price tag, and Americans should realize this fast and make sharp and swift adjustments or pretty soon the party will be over.

Falling real wages, a weak dollar, rising inflation, a massive budget deficit, poverty rising year on year. I don't think its hard to pick holes in Bush's economic plan. The only decent thing about the US economy at the moment is the gradual decrease in unemployment but i dont think that alone makes a healthy economy.

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What's this i hear bed? Word has it you and Pam are sleeping together.

God forbid that people find the threats to our economy lying underneath the surface.
It must be nice to live in a state with a nice economy. I don't have to look for underlying threats to the economy. I have to constantly come up with ways to be unrealistically optimistic.

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"Man lives in the sunlit world of that which he believes to be reality. But unseen by most is an underworld, a place that is just as real... but not as brightly lit... A DARK SIDE!"
-opening from Tales From the Darkside