U.S. dollar in sustained decline while China accumulates trillion dollar currency reserve

Thursday, November 30, 2006 by: Jerome Douglas
Tags: US dollar, U.S. economy, exchange rate

https://www.naturalnews.com/021210_US_dollar_economy.html

Tweet

---

While exports to the U.S. were the worst stock market performers in the European and Asian stock markets, commodity markets tracked higher, with gold, copper and oil becoming cheaper in other currencies as a result of the dollar's decline.

Pressure not to raise European interest rates came as the strength of the euro continued in light of the declining value of the dollar. An expected quarter percentage point rise to 3.5 percent is expected on Dec.7.

This year alone, the U.S. dollar has fallen by more than 10 percent against the euro and 12 percent against the sterling. With these recent declines, some economists suggest the greenback has more reductions coming given a weak economic outlook in the United States.

The prospect of interest rate cuts in the U.S. also has contributed to the partial decline in the dollar's worth, with currencies analyst Steve Saywell of Citigroup saying, "While the economic data remain soft, the dollar will continue to fall."

The deputy governor of the People's Bank of China -- Wu Xiaoling -- indicated that the Asian foreign exchange reserves were at risk from the dollar's fall. However, Xiaoling did not indicate the China would stop adding to its currency reserve.

The U.S. trade deficit has also stoked concerns of an interest rate cute in the spring of 2007, and the worries surrounding the borrowing of yen currency to finance investments in the U.S. all have contributed to the decline in the dollar's value according to analysts.

Ian Stannard -- an analyst at BNP Paribas -- stated that "The dollar is coming under real pressure and this looks like the beginning of a sustained move."

###