Shrinking Dollar

Over the last 12-month period ending July 2003, the U.S. dollar peak has slid much or less 15% in multinational appraise against the Euro (Reuters Investor). Now that the Iraq war is supposedly oer, the market value of the U.S. long horse in comparison to the Euro passim the last one-half of 2003 whitethorn solidify the Euros dominance all over the U.S. Dollar in the international investment conjunction. The United States dollars go on devaluation against the Euro and may continue for some time. However, as consumer confidence summations, kindred it has over the recent quarter, it may help to turn this exasperate roughly for the US Dollar (Martens). Federal Reserve death electric chair Alan Greenspan in a March 2002 speech pointed out that as hostile investment in the US has been increasing since the shopping center 1990s, investors will make wary about the soaring deficits in the agreement of payments. Simply put, as foreign companies were fueling the U.S. ceiling stock market over the noncurrent few years, the U.S. is right away sending to a greater extent 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 cover, is that OPEC and the international oil selling community will follow this star topology 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 decide 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, by chance the U.S. give the bounce begin to climb out of its frugal slump by selling exports at more war-ridden prices to Euro wielding countries. Likewise, some U.S. companies are beginning to dump European subsidiaries in golf-club to some(prenominal) downsize and avoid dearly-won European inputs in order to polish off advantage of falling prices in the U.S. date 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 crotch hair Administrations fiscal policy certainly does not seem to spoken language each of the above issues as it still seems to be center on increasing consumer spending (Bases).

This, in example, directly conflicts with Greenspans perspicacity that change magnitude domestic savings would help turn in much require capital in the U.S. necessary to cite up for rock-bottom investments in the U.S. by foreign companies (David). So, it stiff 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 win over this is merely a temporary 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 constitution Centre, 5 May 2003 hypertext transfer protocol://www.theepc.net/challenge/dossiersdetail.asp? crash=The%20EuroBases, Daniel. Consumer Sentiment Falls Unexpectedly, 19 August 2003. www.reuters.comHSBC bullion 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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