The U.S. dollar continues to slide downward at an accelerating pace due to low interest rates that creates inflation concerns and the large federal budge deficit. The downward pressure on the dollar is expected to continue with no relief in sight for the dollar. For the second week in a row, the dollar has fell nearly 1% against a broad basket of currencies this week.The ICE U.S. Dollar Index closed at its lowest level since August 2008, right before the financial crisis worsened.
Additionally, Chinese government officials have hinted that they may diversify their $3 trillion of currency reserves away from U.S. dollars. Consequently it would chip away at what has been the important source of dollar-buying in recent years. Washington has been pushing Beijing to allow the yuan to continue to appreciate, to help reduce the U.S. trade deficit. But a continued decline in the value of the dollar is a double-edged sword for the U.S. economy.
1 comment:
I don't think this is a bad sign. The US government has been trying to lower the dollar's price to make exporting products become more competitive. And the issue had been that China kept buying US dollar to keep their currency low. Also, as inflation is expected, people would start spending more, kicking up the economy. Certainly, the depreciation of the dollar can bring some risks, but maybe they are worth it. The website doesn't let me read the full article so I can't tell how serious the risks are.
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