The comeback of the dollar
5 years ago you had to pay 0,80 US-Dollar to receive one Euro, now 5 years later in 2008 you have to pay two times the price. That´s enormous, the Euro has won 100 % in value against the Dollar in just 5 years and achieved it´s all-time high on the 22.04.08 with a exchange rate of 1,6018. By the way, this was seemingly so exciting that even Europe’s yellow press took notice of it and came up with headlines like “Shopping for the half price” or “Visit New York, now”. I had to laugh when in November 2007 the international Supermodel Gisele Buendchen explained that from now on she will only accept Euro for her payment. The European exports went down and particularly the world export champion Germany yammered very much.
So the question is how long will the dollar fall in price? Sure thing is that the dollar will come back, so don´t worry. The question is when it will happen, which is not easy to answer. However, in my opinion the dollar will come back either in the next month or at the latest just after the U.S. elections.
Here´s why:
The first and most important reason for my theory is fact that the FED can´t relax the monetary policy anymore and the FED wouldn´t do that neither. On tuesday the third of Juli, for example, even Ben Bernanke the chief of the FED did something which is extremely rare for the FED he spoke about the exchange rate of the US-Dollar and claimed the U.S. Dollar is sharply underrated. And even though also the EZB, the European central bank, has announced to rise the bank lending rates again in my opinion the comeback will come.
Because whereas Europe and the rest of the world are slipping in a recession the weak dollar is helping the U.S. economy to get better through the crisis. Companies like IKEA, Toyota or BMW are investing huge amounts of money in in the U.S. now, the U.S export will grow while the imports will decrease. That all will help the dollar to recover. There is only the impulse from the FED missing but that surely will come right after the elections or even earlier.
But nobody can exactly know how the markets will behave so don´t take my words at face value, it´s just an opinion…
Weak dollar helps US economy for sure. But it also kills the small business because of the recession within the US.
It is more of a psychological impact to US citizens and their spending habits than a real lack of money. But all that is scary enough.
One other thing that will happen is Europeans, Japanese and Chinese will come and buy US whole sale if measures are not taken. - This already happens in export, re-export business and soon will go to real estate and manufacture.
[...] I read this post where Sören Zschoche pronounces, “Because whereas Europe and the rest of the world are [...]
Inflation is too dangerous. The fed will have to start raising the interest rates by the end of the summer to stop oil prices from continuing to climb. The dollar may hold for a few months, but the trade deficit will still remain negative and continue to put the dollar down.
The only way the fed could save the dollar is to raise interest rates above the ‘actual’ inflation which is about 8% - but that would push the nation into a major recession - so it’s not going to happen. The dollar has no where to go but down.
“The first and most important reason for my theory is fact that the FED can´t relax the monetary policy anymore and the FED wouldn´t do that neither. On tuesday the third of Juli, for example…”
Did you even graduate from high school?
“Did you even graduate from high school?”
I think English is not his native language.
Yes that´s true unfortunately English isn´t my native language, so please excuse my spelling and grammar errors. Despite that I hope you still enjoy this blog …
Best regads
Sören
I think it will be a while before we same the same influence the U.S. dollar has as in days gone by.
I have just started my Stock Market Journey:
http://www.ourstockmarketjourney.blogspot.com/
and I think it is very important to understand the true value of the various currencies and their implications for investing in the stock market. Does anyone know of any online resources I can tap into?
Be well.
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Well I live in Croatia In Europe, and in my country dollar is back again. Last year it was 20% lower than usual and now it is 10% lower and growing!
Some months later we are within this market puzzle and the dollar did “come back”, it is now 1.2644,1.2596,1.2615 (past 3 days - source currency-x.com) but I would not call it strong…
Germany is focusing on more markets, to try and supplement the US market problem, being the biggest exporter in europe and the economic engine of the european union. So do France and to some degree the UK.
The US Dollar is really back when it comes to emerging markets, countries in eastern europe have seen rises for the USD versus their local currency (Bulgaria, Romania, etc.) mostly because of companies workin in loan system and loosing their exports channels.
Alot has happened the global economy since this was written. One thing’s for sure, the dollar is in big big trouble.
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