Shrinking Dollar

Over the last 12-month period ending July 2003, the U.S. dollar circuit card has slid more than than or less 15% in multinational look on against the Euro (Reuters Investor). Now that the Iraq war is supposedly oer, the market value of the U.S. dollar mark in comparison to the Euro passim the last half(prenominal) of 2003 may solidify the Euros dominance oer the U.S. Dollar in the outside(a) investment conjunction. The United States dollars go on devaluation against the Euro and may continue for some time. However, as consumer confidence additions, kindred it has over the recent quarter, it may help to turn this exasperate most for the US Dollar (Martens). Federal Reserve death leave Alan Greenspan in a March 2002 speech pointed out that as unconnected investment in the US has been increasing since the heart 1990s, investors will occasion wary about the soaring deficits in the ratio of payments. Simply put, as foreign companies were fueling the U.S. cha piter stock market over the noncurrent few years, the U.S. is outright sending more please payments and dividends abroad and becoming more and more dependent on external money. In addition, more international financial transactions, previously monopolized by the U.S. Dollar currency, be at a time being made in the Euro. A true guardianship that the U.S. may have, with its long-standing romance with crude, is that OPEC and the international oil selling community will follow this troika and also switch to the Euro (Clark). For example, non counting in the skeptical British, the Japanese, Chinese and other oversea investors may very well set in the next that they prefer to deal in the Euro which would contri simplye to a work shift in preferred currency for oil and raw materials (Martens). angiotensin-converting enzyme certain advantage to a strengthening Euro is that it everyows for U.S. goods to be exported at more favorable prices to those countries using the Euro . In this way, perchance the U.S. give th! e bounce begin to climb out of its stinting slump by selling exports at more competitive prices to Euro wielding countries. Likewise, some U.S. companies are beginning to dump European subsidiaries in align to some(prenominal) downsize and avoid dearly-won European inputs in order to polish off advantage of falling prices in the U.S. time the U.S. has certainly seen macroscopic external debts before, the annual deficit of the balance of payments is now approximately 5% of its GDP (Martens). This is, in part, a result of interest rates in the U.S. being at nearly an all time low, which is providing little incentive for foreign entities to invest hood in the U.S. This, as Greenspan noted, reduces opportunity to increase productivity, create interior(prenominal) jobs and reduce the current account balance (HSBC). The shrub Administrations fiscal policy certainly does not seem to mastermind each of the above issues as it still seems to be cogitate on increasing consumer spending (Bases).

This, in example, directly conflicts with Greenspans creed that change magnitude domestic savings would help stand much require capital in the U.S. necessary to guide up for rock-bottom investments in the U.S. by foreign companies (David). So, it form to be seen whether or not the Euro will be dropped in favor of the U.S. Dollar, but in the meantime, foreign imports have become increasingly expensive over the last year, forcing consumers to buy more domestic goods, which in turn contributes to the increased consumer spending that has happened sporadically over the past three months. The performance of the Euro will be hard for the U.S. Dollar to bring down. I, f or one, am not confident(p) this is merely a temporar! y position for the U.S: Dollar. Sources:Clark, William. Review: Dollar vs. Euro War hypertext transfer protocol://www.offnews.info/inteligencia_seguridad/dollar_euro.htmDavid, Javier. FOREX-Euro pares losses, still eyes 3-1/2 month low, 19 August 19, 2003. www.reuters.comMartens, Hans. European indemnity Centre, 5 May 2003 hypertext transfer protocol://www.theepc.net/challenge/dossiersdetail.asp? gate-crash=The%20EuroBases, Daniel. Consumer Sentiment Falls Unexpectedly, 19 August 2003. www.reuters.comHSBC bills Weekly, 13 July 2003, http://www.ameinfo.com/news/ exposit/26118.html If you want to get a full essay, order it on our website: OrderEssay.net

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