More a more foreign countries, who have traditionally been investors of US Treasury Securities, are expressing concerns about the weakness of the US Dollar in the global marketplace. China and oil producing countries are at the center of the debate and are encouraging international finance authorities to review the effects of the weak US Dollar.
Do you think we will see the Euro replace the US Dollar in international market transactions over the next decade? Why? Or, why not?
What effect can the current US deficit have on the US Dollar?
Why is it important for the US to maintain a strong US Dollar and why are monetary authorities not pursuing a strong US Dollar policy right now?
What kind of effect can a weak Dollar have in the US financial markets and the economic recovery as a whole?
Tags: Weak US Dollar
The weakening US dollar can be both bad and good. According to Investment U, “With the dollar weakened, the world’s goods get more expensive for U.S. citizens, so consumption is reduced and the U.S. economy cools a little.” Americans tend to waste things and consume a lot. The US is at a struggling point in its life, this is not the only time that we have been in a recession. The US dollar is used everywhere and if we consume less, then the price with go down due to supply and demand. Yet, overall, the Euro will not replace the US dollar, and the US dollar will bounce back.
Even though the dollar’s main competitor in the global exchange market to the Euro, there still is much hope for the dollar to retain its position as the go-to currency globally. According to an article on The New York Times’ website, The Dow industrials were down about 85 points at 9,996 in early afternoon trading. Meanwhile, (same article) Michael Woolfolk, senior currency strategist at Bank of New York Mellon Corp. said he expects the Federal Reserve will raise rates from their current rock-bottom range near zero early next year. Most economists expect the Fed to start hiking rates later in the year, probably in midsummer or early fall. Raising U.S. interest rates would make the dollar more appealing to traders, because it would cause the assets priced in dollars to have higher returns. So in short, with rate increase making the dollar appealing to traders in the coming months, the dollar would begin to regain its momentum globally
There is potential for the Euro to overtake the US Dollar in international market transactions. First of all, since 1999, the US Dollar’s share of the world’s currency reserves have fallen from 70.9% to 64%, during the same period the Euro has increased from 17.9% to 25.8% (economichelp.org). The Dollar lost more than 25 percent of its value against the Euro between 2000 and 2005 (taipeitimes.com). Also, there are a number of middle eastern countries who used to maintain a fixed exchange rate, however, some countries have decided to drop the pegged dollar. The Euro is more politically attractive, too.
There are positive outcomes to a failing Dollar however. A decreasing valued dollar will increase the competitiveness of US exports. Increasing demand for cheaper exports, with an elastic price, there will be an increase in value of exports. An increase in export demands can reduce unemployment.
So maybe we have to wait it out and see were the Economy takes us. I doubt America would allow the Euro to overtake our The Dollar on the sole fact that we wouldn’t want that reputation. We are a strong country and we have overcome harsh predicaments before.
According to the New York Times “The strongest and most resilient economy in the worldwide recession has one of the weakest currencies.”
With the close comming of economic downfall and an increaseing debt
i think it is impossible to say that the U.S dollar has no effect on the
U.S deficit. We continue to borrow money in order to keep from printing
more of it, it is a less of two evils. I dont think other countries would
hesitate to remove the dollar from the global market. The strength of the
dollar reflects on the strenght of its economy. With the U.S recovering from an economic crisis the strength on the dollar will depend on the
speed of the recovery of the economy.
Even though the US dollar has not been stable; the dollar is still the most dependable currency. If we were to change to the Euro there is more possiblility of economic failure. The E.U. does not have a restrictive policy of sorts to hold out weaker countries from their grouping. The basic policy is that the country they accept must be stable, economically competitive with other EU markets, and accept to work with the other nations (this was a generalization of the restrictions from europa glossary). If one country happens to default/collapse the EU will be compromised since each country depends on one another and that not one country is able to support the rest. This is what makes the United States a stronger country since the unification of the states prevents the collapse of the whole. Thus the US dollar is stronger yet the Euro has more buying power.
This is a shocking possibility that is unfortunately all too real. Pockets are hurting in every country, with some worse off than others. In zimbabwe their currency is virtually worthless and they’re actually in need of the US dollar according to BBC News.
It is really too soon to tell where things are headed. If gas prices do continue to rise and our country is still pouring money into war efforts overseas then we will definitely see some major changes in our economical structure over the next 10 years. Most of which I would only assume to be negative.
A better allocation of resources would give us the best bet at surviving these hard times. Wasting money to put up mile markers on highways that drivers don’t even know how to use is just going to bury us even deeper.
Since the economy crash, the US dollar is losing its strong original value against other monetary units, especially the Euro, which makes the foreign investors worried about the profits they are losing. Having a weak dollar is not good at all, since the US tent to buy more from outside then to sale, goods will be more expensive and they will only benefit the country we are buying from. I don’t want to say that the Euro will overcome the US dollar in the next decade, but it can happen if the economy stay the way it is without no huge change to it. As long as the economy stays down, the dollar will always be weak, and I think they both work together. I believe once we recover from this really bad economy, the dollar will get back the way it was.
With the power of the U.S. dollar questionable, investors and anyone working closely with the market should feel worried. According to Moneynews.com, the Euro made a rebound by 20% at the end of 2008 into 2009 trading at $1.36, and it was considered to have reached a high that December. The article states Europeans have low hopes behind the currency system as Americans do with our own. Losing foreign faith in the American dollar would equate to less trade with our country and hurt our economy further in a time of rescission that we are already in. Americans are still really waiting to see results from the economic stimulus programs brought on by our current administration, only time will tell if it is enough to generate a high level of spending again.
I think that the US Dollar is not going to lose or be taken over by Euros. The U.S. is powerful enough to keep the dollar as is. Even though we have a war and is going down the tubes but coming out of it right now. We will keep it. I don’t have any statistics on it or numbers but we are good with the oil companies and people we get stuff from so I am not worried about it. If we keep spending we will be fine as a country.
What kind of effect can a weak Dollar have in the US financial markets and the economic recovery as a whole?
There is a negative effect in the US financial markets with a weak Dollar. A weak Dollar indicates a weak country. According to the NY TIMES, higher costs at home for imported goods as diverse as Italian suits, French wines and Japanese stereos and cameras, as well as more prosaic commodities like oil. The dollar’s drop is a central factor in oil’s recent rise back above $75 a barrel, which will mean higher gasoline prices. A weak Dollar is a major problem for American jobs and living standards. With the recent drop, the dollar is valued against the euro, but needs to ease 10 percent against Asian currencies like the Japanese yen to create a level playing field for American business. That’s why I believe we need a strong US Dollar, so all the other countries won’t make us look weak!
I do not think that the Euro will replace the US Dollar in the world’s financial markets. While it is undergoing some hard times, and other currencies have picked up steam, our economy has been known to have its up’s and downs, more on the upside however. If the economy grows like it has during certain points in the 50’s, and 90’s, then our wealth as a nation could drastically increase, largening the already enormous gap between the financial strength of the United States and the rest of the world. Despite the grim mood of the nation regarding the economy and the dollar, we have handled the world-wide economic issues better if not the best compared to any other major super power.
However the deficit could have a potentially damaging blow on the dollar. If the deficit increases and doesn’t come down in the coming years, the pressure on the economy to produce will only increase. Also the size of the deficit is an indicator to world markets on just how well the dollar is producing and faring, and thus if our overall economic picture looks bleak as a nation, our currency will also appear less stable.
That being said, I stand by the notion that the Euro will not replace the Dollar for many reasons, including that the world is more likely to trust the United States dollar to make a recovery because it has never failed in the past. They are also likely to do so, to keep the US on their good side considering the United States is the largest force for good in the world, the strongest militarily and still economically powerful nation.
The US dollar has always been one sure thing in the world wide financial markets and that point isn’t lost on leaders around the globe, even those who have luke warm support for the United States.
It is very difficult to state what will happen over the next decade. In my opinion the dollar will maintain in international transactions over the next decade. The US has a tendency to recover when in tough times. The Euro may be increasing but as stated in moneywatch.com due to the US dollar going down traders are borrowing in the low-yielding currencies to buy higher-yielding assets. this could help the economy recover in some matter.
The current US deficit could cause the US dollar to be worth less than what it was. Buying things internationally will cost the US more because the Dollar has decreased in amount.
It is important for the US to maintain a strong US dollar because the US dollar is what has been used for international buys. The US dollar is known for its value. By having the value of the dollar go down it could just result in a huge mess in the economy. The value of the US dollar has kept the economy strong for a while now. Monetary authorities are not persuing a strong US dollar policy because this is supposed to help out the economy. with the Dollar being worth less, people are buying more. This will balance off the economy.
A weak US dollar can have a good effect on the US financial markets and the economic recovery as a whole. As stated above, the website states that traders are borrowing money at this low yiekding currency and buying higher yielding assets. This strategy is good but only as long as the dollar maintains at a low value for the time being. This is another attempt to recover the bad economy.
I believe the US deficit will have a negative effect on the US dollar. The countries currently funding the US deficit will no longer invest in US securities. According to Nobel Prize-winning economist Paul A. Samuelson, for example, raised the specter of a “truly global financial panic” if countries funding the US deficit, particularly China, decide their investments in US Treasury securities are no longer safe. The declining American dollar will leave Americans with an expensive cost of living. According to Khaleej Times Online “A declining dollar leaves Americans worse off by driving up the cost of living, making imports of manufactured goods and commodities more expensive, and reducing the value of foreign investments when converted to dollars.” The US dollar is the strongest and most dependable currency we need to persue a strong US dollar policy and improve our economy.
Do you think we will see the Euro replace the US Dollar in international market transactions over the next decade? Why? Or, why not?
It is quite possible that a basket of currencies including the Euro will replace the US Dollar in international market transactions within the next decade. In the article, “Gulf Officials Deny Plan to Replace Dollar” by Tahini Karrar-Lewsly and Summer Said, they write, “Oil-rich Arab states shifting away from the dollar to price oil could add to mounting pressure on the greenback as the world’s reserve currency. Dogged by concerns that rock-bottom interest rates and soaring government debt in the U.S. will undermine its value, the dollar has lost ground against a basket of rival currencies this year.” OPEC Governor Mohammad Ali Khatibi reports that Iran switched currencies three years ago saying, “We replaced dollars with other valuable, stable currencies including the euro and yen for our oil income and we are very happy and not sorry we did this because the dollar is becoming weaker.” Although the Gulf officials deny having a plan to replace the dollar, it may be inevitable due to its withering value.
Personally I do not think the Euro will ever replace the US Dollar in international market transactions because there is a lot more equity in the US dollar, Ever since the Euro launched back in 1999, admirers have pushed the notion of the euro as a rival to the dollar. An article in the News-Week states “The euro is faltering as the deepening global economic crisis exposes the fault lines within the 16-nation euro zone, set to shrink by 1.9 percent this year, compared to 1.5 percent in the U.S. Once again, economists are airing their doubts over the currency’s long-term prospects while analysts are busy re-assessing the credit ratings of Europe’s underperformers.”; Although we are in a recession and the current US deficit is affecting the Dollar, it is inevitable that it will recover; an article by James J. Angel of Businessweek.com states that “Financial markets are already signaling that the panic phase is over.”, So it is important that the US maintain a strong US dollar, because the US dollar is the backbone that keeps the world international market transactions running smoothly.
European union has been on the rise over the last decade. Since they started with only 7 countries and now have 27 members. This shows that they are becoming more and more powerful. There for I don’t think that they will need the dollar to do business transactions.
The U.S. doll.ar has been strong for many years and even in weakness we have managed to stay on top of other currencies. The Euro has a strong backing but I’m not sure that it will overtake the U.S. dollar because of our record of having such a strong dollar. Our deficit affects our standings as a whole with the entire world (military, economic and overall strangth). Our focus should be keeping our dollar strong but we seem to have a focus on all kinds of other issues such as healthcare. THe weakness of our dollar makes it harder to recover ground with a dollar that is worth little to us and the outside world, where fears are always a concern. Our past has to say something for us and although we seem weak we must put forth a brave face and continue to show strength in our other areas that have kept us on top before.
Why is it important for the US to maintain a strong US Dollar and why are monetary authorities not pursuing a strong US Dollar policy right now?
It is important for the US to maintain a strong US Dollar so that we can compete with the Euro. We need to at least be competitive with the Euro because as the dollar weakens for the eighth straight year and the Euro continues to grow, the Dollar may sometime be overtaken by the Euro as the global reserve currency. Some monetary authorities are not pursuing a strong dollar because if the dollar continues to decline then the U.S.’s exports become more attractive to foreign buyers. With more exports being sold comes more revenue for the U.S. With this increased revenue the U.S. could eventually climb their way out of the large amount of debt that they are in and finally get out of the red.
Even with the economy this bad and the US dollar this week i believe the Dollar wont be replaced yet. Even though the US dollar is week, the US isnt. The United States is still the most powerful nation in the world and probably the most influential nation in the world aswell. I think that if the US dollar stays this week for to long then they might replace it, but I doubt it will be in the next decade. The strength of the dollar also depends on the US economy. If our economy stays this bad without change for the better, then the chance of the dollars worth to increase is low, and if the economy doesnt change then the dollar will probably be replaced in international market transactions. My belief is that the US economy will get better in the next decade and the dollar wont be replaced.
It is hard to see any other form of currency being used in the international market because of the number of years the US dollar has been used. If they were to change the international currency it would put an added straight on all markets, because they have to change the way they have done things for decades and that doesn’t happen over night. The US deficit could cause the dollar to become weaker or stranger depending on the way the government chooses to try to fix it, however for some reason the government doesn’t seem to want to fix the weakness of the dollar. The government needs to increase the dollars strength any way that they can, (get it in the gym already!), the best shot our economy has at improving is to increase the strength of the dollar because we do a lot of importing which means we wouldn’t have to spend as much in trade and keep more money here in the United States.
I do not beleive that the US dollar is is in any danger of being taken over by the Euro. The Unites States continues to have incredable buying power of products and services overseas and even though that the economy is notin the greatest shape, we continue to survive with the opurchasing power we have behind up. The US dollar is recgonized and accepted almost worldwide and I believe that will continue.
I believe that the dollar has had its run, and that maybe it is time for a stronger and more stable currency to take over. Aside from that United States is one country on its own, any changes affect the entire country, reflecting strongly in its currency. While in Europe there are many countries that sustain the Euro, if one country is not doing very well, but there is anther that is striving, they balance each other out, so the Euro does not depend on one country’s stability, and its chances of strength stays high.
In International markets it is quite clear that the Euro will replace the dollar. Why would the world respect a countries currency that is slowly dying. If the dollar dose get replaced will americans start wanting to trade in euros ? America should embrace the ero and not shy away from it. I have no faith in the america government to save the depletion of the dollar. It would be wise for other countries to drop the dollar because it is losing money every day. America needs to get its ego checked. The replacement of the Euro would be a deffenite blow to america.
I do not believe that we will see the Euro take over the U.S. dollar in international transactions over the next decade. The reason I believe it will not is that the overall world economy, throughout history, has always found a way to “right” itself. In other words, it always finds a way to come full circle ( What goes up must come down, and vice versa ). For example, just about 15 years ago I took a trip to Portugal and the U.S. currency I had transferred to almost double. Now, it has almost reversed ( $1.49 U.S. to 1 Euro ). It goes without saying that the U.S. deficit can have a drastic affect on the U.S. dollar simply because the value of the dollar decreases with the deficit increasing.
Poor Mr. George Washington, use to be worth $1 and now is becoming less valuable. Mr. George can help thank the U.S. for its $12 trillion debt according to the useconomy.about.com in value of a US dollar by Kimberly Amadeo. I think it will effect the u.s. greatly with exchange rates which change daily and the international competition among countries and have a higher demand since people will start trading with the euro more. In order to save the dollar the us must raise taxes to pay off their debt but that’ll effect economic growth in a negative way. Either way its a lose -lose situation for a while and hopefully works itself out in to a positive way.
I believe that the dollar will never be replace in the global market. Like an article from the NYT’s stated, “The strongest and most resilient economy in the worldwide recession has one of the weakest currencies.” Our capatalistic economy is a bend but dont break economy. Sure, since around 2000, the US dollar’s share of the world’s reserve has fallen from 70.9% to 64% while at the same time the Euro’s share in the world reserves increased from 18% to 25.8%. The weakened dollar can have its upside. Since the dollar is weaker than the Euro, the US can be competitive in the export market once again, which would in turn create new jobs.
The euro’s share in the different international markets is average, still much smaller than the US dollar’s. The rate of growth of its share, in the 10 years since its creation, was high at first and lower later. In any case, its present rate, if maintained, could be enough to overtake the US dollar before the end of this century. The euro’s share in the world’s financial markets would receive a major boost if the United Kingdom were to adopt it, given London’s position as one of the world’s two leading financial markets, both in euros and in US dollars.
It is possible for Euro to overtake the dollar in the next decade. The only thing needed for it to happen is for the dollar to get weaker and Euro to get stronger. In my opinion the dollar will continue to get weaker because the country’s deficit is growing and the monetary authorities have no plans on making it stronger. The dollar weakening will also make it hard for our economy to recover and possibly make it worse.
I don’t feel as if the Euro will ever replace the US dollar! Mainly the US is the most powerful country in the world, so even with the recession and the printing of more money i feel as if it will only decrease slightly for a short period of time. It is very important to maintain a strong US dollar for many reasons, one including the shipment of over seas products and oil. If the dollar decrease much more then the economic recovery could never happen. So in order to be the strongest country in the world with the most powerful source of money, you can’t print great amount at a time. It will just decrease the strength of it through out the world.
The weakness of the US dollar is a direct reflection of our monetary policy, and how the Federal Reserve works, along with a bailout that should be defined in my interpretation as hyper-inflation. The president met with the G20, or 20 greatest economies in early October, and news reports note an agenda to push toward a global currency, as the US dollar is so weak it is not being looked at as the standard in the comparison of money. To understand why the dollar is so weak, one must understand how the Federal Reserve works, which I don’t think most do, but I have been very interested in this for years, and have done my fair share of reading and research. The Fed is a private bank that creates money and controls its supply, and has a monopoly over the amount of money produced, which none of is backed by gold or anything with worth. This money is pumped into the economy with an interest rate attached, which means that for every lets say 100 dolars put out, they require 102 dollars returned(example). This interest, can only be payed back by borrowing more money from the Fed , as they have the only money supply which means all money in circulation is mere debt, and the system will never allow us to completely eliminate our national deficit, but only reduce it( which i highly doubt) by the Fed’s reduction of the interest rate which leads to the over- production of paper money which slowly gets weaker.
As a foreign reserve currency, the US dollar is among the largest in the world. A U.S. Treasury Department report said that from the end of 1999 to second quarter 2008, foreign reserves in dollars fell from 71% to 62.5%, while euro holdings rose from 18% to 27%. Looking at the statistics it is very possible but I dont believe it will actually happen. The US has been in control of the market and I can’t see them losing that power. The current deficit of the US drastically drops the value of the dollar. If the US dollar is in fact replaced the U.S. could face higher interest rates, increased taxes, and reduced economic growth for the long-term.
I hope we don’t see the Euro replace the Us dollar, I think that could be the worst thing that could happen to our country. According to gftfroex.com “It’s been an exceptionally active year in the foreign exchange market as currency volatilities hit record highs. In the first half of the year, many traders worried about how much further the dollar would fall, but in the second half of the year the concern became how much further the dollar would rise. After hitting a record low against the euro in the second quarter, in the beginning of the fourth quarter, the U.S. dollar actually surged to a two-year high. From trough to peak, the dollar index rose more than 23 percent in 2008.” The dollar is not so weak as we have thought, in 2008 we rised 23% but we also have to wait for the whole year of 2009 to see how the dollar increased or decreased and by how much. If it increases we could be hopefully getting out of the recession and we will not have to worry about the Euro taking over the U.S. Dollar. I believe if we focus on getting the U.S. Dollar back up to the top we will hopefully be all set and not worry about other currency
I don’t think the Euro will replace the US Dollar in the international market transactions over the next decade because the economy will grow and so will the dollar. It is very important for the US to maintain a strong US Dollar policy right now because it will help the economy and get the US back to where it was a decade ago. A weak Dollar can have a very negative effect in the US financial markets because this is not allow the economic to recover as a whole and the US would no longer be one of the strongest counrties in the world.
Yes, i believe that there is a good chance that over the next decade the euro could replace the dollar in the international market. In an article from the Economist View, Matt Nesvisky mentions that the EU experiences nothing like America’s current account deficit and external debt, which apply considerable pressures on the dollar. With much less pressure in terms of deficit and external debt behind it the euro does look more appealing than the dollar. Another statement in the same article says, In a 2005 survey of central banks, most respondents said they intended further diversification away from the dollar, and several have recently made public announcements along these lines. if they plan on growing away from the dollar, chances are the euro will be the next choice.
The dollar is here and it is here to stay. The Euro is being used by many countries today but isn’t the metric system as well? The US will stand its ground and continue to try and increase the strength of the dollar and hopefully will not switch over to the Euro. If we switched that would show a huge sign of weakness to the world. It is important for us that other countries want our money, dollars. This allows us to do trade with who we want, when we want to and that is also why it is important for us to have a strong dollar. We can not afford, for our economy’s sake, to lose the dollar and show the world that we are weak.
Ever since the economy has weakend, and the US started the ressesion, the US dollar also has weakend dramaticly. The Euro has become the strongest currency in the world. Even though the Euro is the strongest currency, it dosent replace the streighth of the country. I do not beleive tha the EURO will ever replace the dollar.
I believe that the EURO will overcome the Dollar in the future, although I’m not sure if it’ll be in the next decade, this is due to the weak economy, employment, etc. This will effect the US economy as a whole because investors in the US will have to pay more if they want to buy from outside the country, for example, if 3 Dollars is equal to 1 EURO, something that is worth 5 EUROS would be worth 15 Dollars. Therefore they would have to spend much more money to invest outside the US.
The US Dollar may be facing hard times now, but it is not the first time. Our economic recession is weakening the dollar for a period of time, but with a better economy it will come back. The Euro is definitely coming up in the international marketplace, but still not meeting the US Dollar’s mark as the primary currency in international transactions. It is important to maintain the strength of the dollar for our consumers; the weak dollar has benefits such as lower costs for US exports which increases demand. Using the US house market as an example of the effect of the weak US dollar, the weak dollar has made home values depreciate causing banks to lose lots of money on foreclosed homes.
The US dallars is is realative weaker than Euro and British Pounds.If the dallars keep getting weaker that I think Euro is going to replace the dallars in the intewrnational market. Foreign reserves in dollars fell from 71% to 62.5%, where as Euro holdings rose from 18% to 27%.We cannot afford to see dallars fall anymore cause Euro is going to replace it.
In my opinion, I don’t think the Euro will replace the US dollar in international market transactions over the next decade. I believe this because the Euro’s share in the international market is much smaller than that of the U.S. dollar. The US Dollar is in a weak position right now since interest rates are rising and U.S. trades and budget deficits are increasing. The effects the current US deficit has on the US dollar are stated in an article in the Foreign Affairs “Even as efforts to recover from the current crisis go forward, the United States should launch new policies to avoid large external deficits, balance the budget, and adapt to a global currency system less centered on the dollar”. The dollar has depreciated and the United States has an outstanding deficit which is causing some countries to lose faith in the dollar has their international reserve currency.
According with an article form the New york times early this week “The strongest and most resilient economy in the worldwide recession has one of the weakest currencies, however
the Euro made a rebound by 20% at the end of 2008 into 2009 trading at $1.36, and it was considered to have reached a high that December. The article states Europeans have low hopes behind the currency system as Americans do with our own.
as much trouble as the dollar is in due to the printing and spending I don’t think it would ever be replace by the Euro. That is if our politics do some repair damage to the already week dollar
Although the strength of the US dollar depends on it’s economy,i still dont think its Euros will or can replace us dollar in international market transactions over the next decade but it’s good to know that if the dollar continues to remain weak it may not be a good strong to tell for the US economy
I do not think that the Euro will ever replace the U.S dollar because just like other recessions that have taken place in the U.S we have gotten out of them. I am sure that this is a possibility but the probability of this happening is slim to none. Eventhough we have he weakest currency it only means that it will take more time to build it up again but with the recession as it is and interest rates so high the currency obviuously has to take a hit , but in time to come we will be seeing the U.S dollar take a change for the better.
I believe that the US dollar will not be replaced because it is the most common form of currency, around the world. However it will depreciate in value even more due to the current US deficit. I see in the future that is the US does not maintain a strong US dollar there will begin to be many, many changes through out the world.
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