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The Dollar Is Strong. That Is Good for the U.S. but Bad for the World.

THE NEW YORK TIMES: The Federal Reserve may have no choice but to wage a relentless inflation fight, but countries rich and poor are feeling the pain of plunging currencies.

The Federal Reserve’s determination to crush inflation at home by raising interest rates is inflicting profound pain in other countries — pushing up prices, ballooning the size of debt payments and increasing the risk of a deep recession.

Those interest rate increases are pumping up the value of the dollar — the go-to currency for much of the world’s trade and transactions — and causing economic turmoil in both rich and poor nations. In Britain and across much of the European continent, the dollar’s acceleration is helping feed stinging inflation.

On Monday, the British pound touched a record low against the dollar as investors balked at a government tax cut and spending plan. And China, which tightly controls its currency, fixed the renminbi at its lowest level in two years while taking steps to manage its decline.

In Nigeria and Somalia, where the risk of starvation already lurks, the strong dollar is pushing up the price of imported food, fuel and medicine. The strong dollar is nudging debt-ridden Argentina, Egypt and Kenya closer to default and threatening to discourage foreign investment in emerging markets like India and South Korea.

“For the rest of the world, it’s a no-win situation,” said Eswar Prasad, an economics professor at Cornell and author of several books on currencies. At the same time, he said, the Fed has no choice but to act aggressively to control inflation: “Any delay in action could make things potentially even worse.” » | Patricia Cohen, Reporting from London | Monday, September 26, 2022

«Einbahnstrasse Euro - Franken»: Der Euro fällt auf ein Rekordtief

NEUE ZÜRCHER ZEITUNG: Der Euro setzt seine Talfahrt gegenüber dem Franken und dem Dollar fort. Das schwindende Vertrauen der Investoren in die Euro-Zone gilt als einer der Hauptgründe.

Das Image der europäischen Gemeinschaftswährung Euro erleidet immer mehr Kratzer. | Lennart Preiss / AP
Der Euro wird zum Franken immer schwächer. Diese Woche war ein Euro zeitweise nur noch 0.9605 Franken wert. Damit ist die europäische Gemeinschaftswährung gegenüber dem Franken auf ein Rekordtief gefallen. Ulrich Leuchtmann, Ökonom bei der Commerzbank, schrieb diesbezüglich in einem Kommentar von der «Einbahnstrasse Euro - Franken» – für die Gemeinschaftswährung führt sie nach unten. Mitte September vergangenen Jahres wurden für einen Euro noch 1.0932 Franken bezahlt.

Auch gegenüber dem Dollar setzt der Euro seine monatelange Talfahrt fort. In letzter Zeit nahm die Gemeinschaftswährung dabei Kurs auf die Parität, am Freitag wurden für einen Euro noch 1.0047 Dollar bezahlt. Anfang September vergangenen Jahres waren es noch 1.1880 Dollar. Seit Jahresbeginn hat der Euro gemäss Daten von Bloomberg gegenüber dem Franken um 7,9 Prozent und gegenüber dem Dollar um 13 Prozent an Wert verloren. » | Michael Ferber | Samstag, 20. August 20, 2022

What a Sinking Euro Means for Europe and the US | DW Business

Jul 15, 2022 The euro has taken a major beating against its US peer since Russia's invasion of Ukraine in February, falling to its lowest level in 20 years. While a weakened euro should worry European consumers, US travelers visiting Europe could benefit.

Euro und Dollar erreichen Parität

ERSTMALS SEIT 2002
FRANKFURTER ALLGEMEINE ZEITUNG: An den Devisenmärkten ist die europäische Gemeinschaftswährung nun genauso viel Wert wie der amerikanische Dollar. Anleger flüchten sich derzeit in Dollar-Anlagen, da alles andere risikobehaftet scheint.

Nach einigen Tagen Ringen hat der Euro nun die Grenze von einem Dollar nach unten durchbrochen. Damit ist die europäische Gemeinschaftswährung zum ersten Mal seit 2002 wieder genauso viel Wert wie der amerikanische Dollar. Am Mittag kostete ein Euro genau 1,0000 Dollar. Devisen schwanken normalerweise in geringem Maße, deshalb werden ihre Wechselkurse an den Finanzmärkten mit bis zu vier Nachkommastellen angegeben. » | Von Gregor Brunner | Dienstag, 12. Juli 2022

L’euro atteint la parité avec le dollar, une première depuis sa mise en circulation : La monnaie unique européenne est plombée par le risque de coupure des approvisionnements russes en gaz pour l’Union européenne. »

Euro Nears Parity with Dollar as Pound Hits Two-year Low

THE GUARDIAN: Europe’s single currency battered by fears over gas supply from Russia and US interest rate rises

One euro coin placed on top of one dollar bills Photograph: Gerard Bottino/SOPA Images/REX/Shutterstock
The euro is on the brink of parity with the dollar as investors fear that an energy crisis will plunge the region’s economy into recession.

The single currency fell to just $1.0003 on Tuesday morning, pushed lower by worries that the scheduled shutdown of the Nord Stream 1 pipeline – which transports natural gas from Russia to Europe – for maintenance could be made permanent.

Russia’s invasion of Ukraine in late February has triggered fears over Europe’s energy supply and hurt the region’s economies, pushing the euro 12% lower against the US dollar so far this year.

The euro is also being hit by expectations of further aggressive interest rate rises by the US Federal Reserve, which are driving the dollar higher. » | Julia Kollewe and Graeme Wearden | Tuesday, July 12, 2022

Business Live: Euro falls to brink of parity with dollar over fears Russia will cut off gas supplies »

'Dollar Valueless, About to Crash' - World Bank Whistleblower

The Sun Is Setting on Dollar Supremacy, and with It, American Power

THE DAILY TELEGRAPH: A serious alternative to the dollar is still a long way off, but the latest shenanigans on Capitol Hill have given the search for them renewed momentum

All great empires – from the Greek, to the Roman, the Spanish and the British - have at their heart a dominant means of exchange which is very much part of their political and social hegemony. Once upon a time, it was Roman coinage which was the world's pre-eminent currency. In more recent times it was the British pound. Today, it's the US dollar to which international investors flock as a safe haven for their money. Highly liquid and apparently reliable – until recently at least – nothing else comes even remotely close to the greenback's dominant position in the international monetary system.

That this position – what Giscard d'Estaing referred to as America's "exorbitant privilege" – could so casually be put at risk by politicians on Capitol Hill is an extraordinary spectacle that may be indicative of a great power already seriously on the wane.

With the pound, the fall from grace was swift. Britain emerged from the devastation of the First World War an irreparably damaged economic and military power, with crushing debts and a deeply impaired manufacturing sector.

The dollar was able quickly to usurp the pound's position. Final defeat for sterling came with Britain's decision to leave the gold standard in 1931 – an economically sensible decision but a psychological turning point for sterling from which it never recovered.

Lack of any credible alternative means it won't happen so quickly with the dollar. For all the progress of the last 30 years, China for now remains a much smaller economy than the US and in any case is nowhere near ready financially to assume such a role. As for the euro, the dollar needn't trouble itself much about this one-time pretender to the throne. Read on and comment » | Jeremy Warner, Assistant Editor | Monday, October 14, 2013

The Dollar Bubble

Dollar Falls to New Low as Markets Await Fed's Next Move
THE GUARDIAN: Ben Bernanke, chairman of Federal Reserve, expected to maintain loose monetary policy

The US dollar has fallen to new lows against other major currencies, undermined by predictions that the US would continue to resist pressure to raise interest rates.

In early trading, the dollar dropped to its weakest level ever against the Swiss franc, having touched a record low against the Australian dollar overnight. It also hit a four-week low against the yen, while the dollar index, which measures it against a basket of rival currencies, was close to its lowest level since August 2008.

The fall came a few hours ahead of the start of the Federal Reserve's monthly two-day meeting to set monetary policy.

City experts believe that this will be a defining week for the dollar. Ben Bernanke, chairman of the Fed, will for the first time hold a press conference on Wednesday evening immediately after the Federal open market committee has voted. Traders expect no change to the Fed's current loose monetary position. » | Graeme Wearden | Tuesday, April 26, 2011

US Dollar Should Be Replaced by New Global Reserve – Leading Economist

Why the Dollar's Reign Is Near an End
THE WALL STREET JOURNAL: For decades the dollar has served as the world's main reserve currency, but, argues Barry Eichengreen, it will soon have to share that role. Here's why—and what it will mean for international markets and companies.

The single most astonishing fact about foreign exchange is not the high volume of transactions, as incredible as that growth has been. Nor is it the volatility of currency rates, as wild as the markets are these days.

Instead, it's the extent to which the market remains dollar-centric.

Consider this: When a South Korean wine wholesaler wants to import Chilean cabernet, the Korean importer buys U.S. dollars, not pesos, with which to pay the Chilean exporter. Indeed, the dollar is virtually the exclusive vehicle for foreign-exchange transactions between Chile and Korea, despite the fact that less than 20% of the merchandise trade of both countries is with the U.S.

Chile and Korea are hardly an anomaly: Fully 85% of foreign-exchange transactions world-wide are trades of other currencies for dollars. What's more, what is true of foreign-exchange transactions is true of other international business. The Organization of Petroleum Exporting Countries sets the price of oil in dollars. The dollar is the currency of denomination of half of all international debt securities. More than 60% of the foreign reserves of central banks and governments are in dollars.

The greenback, in other words, is not just America's currency. It's the world's.

But as astonishing as that is, what may be even more astonishing is this: The dollar's reign is coming to an end.

I believe that over the next 10 years, we're going to see a profound shift toward a world in which several currencies compete for dominance.

The impact of such a shift will be equally profound, with implications for, among other things, the stability of exchange rates, the stability of financial markets, the ease with which the U.S. will be able to finance budget and current-account deficits, and whether the Fed can follow a policy of benign neglect toward the dollar. >>> Barry Eichengreen | Wednesday, March 02, 2011

Dr. Eichengreen is the George C. Pardee and Helen N. Pardee professor of economics and political science at the University of California, Berkeley. His new book is "Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System." He can be reached at reports@wsj.com.

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Ausweitung der Yuan-Menge: China attackiert den Dollar
Dollar- und Yuan-Noten: Drohende Dollar-Dämmerung. Bild: Spiegel Online
SPIEGEL ONLINE: Die chinesische Notenbank überrascht mit einer spektakulären Ankündigung: Die angehende Supermacht will ihren kompletten Außenhandel künftig in Yuan abwickeln, nicht mehr in Dollar. Peking rüttelt an Amerikas Anspruch, die Leitwährung zu stellen - mit gravierenden Folgen für die USA.

Berlin - Es ist unscheinbare Ankündigung, doch sie hat das Potential, das Machtgefüge auf dem Weltwährungsmarkt nachhaltig zu verändern: China stärkt die internationale Rolle des Yuan. Alle Exporteure und Importeure sollen noch in diesem Jahr die Geschäfte mit ihren ausländischen Partnern in Yuan abrechnen können, teilte die Zentralbank am Mittwoch in Peking mit.

Damit werde auf die wachsende Bedeutung des Yuan als weltweite Reservewährung reagiert. "Die Marktnachfrage nach einer grenzüberschreitenden Verwendung des Yuan steigt", erklärte die Zentralbank. Testweise wurde bereits im vergangenen Jahr 67.000 Unternehmen in 20 Provinzen erlaubt, ihre Auslandsgeschäfte in Yuan abzuwickeln. Das Handelsvolumen belief sich auf umgerechnet rund 56 Milliarden Euro.

Jetzt soll die Yuan-Menge ausgeweitet werden, es sollen deutlich mehr Geschäfte in der chinesischen Währung abgewickelt werden - und weniger in der amerikanischen. Chinesische Unternehmen handeln zurzeit oft in Dollar, sie sind dadurch abhängig von den Entscheidungen der US-Notenbank Fed, zahlen bei einem steigenden Ölpreis drauf und müssen höhere Transaktionsgebühren als nötig berappen. Das soll sich jetzt ändern.

Langfristig will die Volksrepublik sogar noch weiter gehen. Sie will den streng reglementierten Yuan schrittweise in eine frei konvertierbare Weltwährung aufbauen. >>> ssu/AFP/Reuters | Mittwoch, 02. M¨rz 2011

Diskutieren Sie über diesen Artikel >>>

New Move to Make Yuan a Global Currency
A Chinese clerk counts yuan next to U.S. dollars. Photograph: The Wall Street Journal
THE WALL STREET JOURNAL: China has launched trading in its currency in the U.S. for the first time, an explicit endorsement by Beijing of the fast-growing market in the yuan and a significant step in the country's plan to foster global trading in its currency.

The state-controlled Bank of China Ltd. is allowing customers to trade the yuan, also known as the renminbi, in the U.S., expanding the nascent offshore market for the currency which began last year in Hong Kong.

The decision is the latest move by China to allow the yuan, whose value is still tightly controlled by the government, to become an international currency that can be used for trade and investment.

"We're preparing for the day when renminbi becomes fully convertible," Li Xiaojing, general manager of Bank of China's New York branch, told The Wall Street Journal. He said the bank's goal is to become "the renminbi clearing center in America." >>> Lingling Wei | Wednesday, January 12, 2011

Russia & China Take on the Dollar

The Age of the Dollar Is Drawing to a Close
THE DAILY TELEGRAPH: Currency competition is the only way to fix the world economy, says Jeremy Warner.

Dollar hegemony was itself a major cause of both the imbalances and the crisis. Photo: The Daily Telegraph
Right from the start of the financial crisis, it was apparent that one of its biggest long-term casualties would be the mighty dollar, and with it, very possibly, American economic hegemony. The process would take time – possibly a decade or more – but the starting gun had been fired.

At next week's meeting in Seoul of the G20's leaders, there will be no last rites – this hopelessly unwieldy exercise in global government wouldn't recognise a corpse if stood before it in a coffin – but it seems clear that this tragedy is already approaching its denouement.

To understand why, you have to go back to the origins of the credit crunch, which lay in the giant trade and capital imbalances that have long ruled the world economy. Over the past 20 years, the globe has become divided in highly dangerous ways into surplus and deficit nations: those that produced a surplus of goods and savings, and those that borrowed the savings to buy the goods.

It's a strange, Alice in Wonderland world that sees one of the planet's richest economies borrowing from one of the poorest to pay for goods way beyond the reach of the people actually producing them. But that process, in effect, came to define the relationship between America and China. The resulting credit-fuelled glut in productive capacity was almost bound to end in a corrective global recession, even without the unsustainable real-estate bubble that the excess of savings also produced. And sure enough, that's exactly what happened.

When politicians see a problem, especially one on this scale, they feel obliged to regulate it. But so far, they've been unable to make headway. This is mainly because the surplus nations are jealous defenders of their essentially mercantilist economic models. Exporting to the deficit nations has served them well, and they are reluctant to change. >>> Jeremy Warner | Friday, November 05, 2010

THE DAILY TELEGRAPH: Doubts grow over wisdom of Ben Bernanke 'super-put': The early verdict is in on the US Federal Reserve's $600bn of fresh money through quantitative easing. Yields on 30-year Treasury bonds jumped 20 basis points to 4.07pc. >>> Ambrose Evans-Pritchard, International Business Editor | Thursday, November 04, 2010

Billige Dollar: Schäuble – Die Fed bricht internationale Abmachung
WELT ONLINE: Die US-Notenbank will die Wirtschaft mit der Notenpresse ankurbeln. Finanzminister Schäuble übt daran nun ungewöhnlich scharfe Kritik.

Finanzminister Schäuble kündigt an, die "amerikanischen Freunde" auf dem G-20-Gipfel kritisch ansprechen zu wollen. Foto: Welt Online
Bundesfinanzminister Wolfgang Schäuble (CDU) hat die jüngste Maßnahme der US-Notenbank zur Ankurbelung der Wirtschaft als Bruch internationaler Abmachungen kritisiert. Die großen Wirtschaftsprobleme der USA seien mit noch mehr Schulden nicht zu lösen, sagte Schäuble am Donnerstagabend den ARD-„Tagesthemen“. „Das war übrigens gemeinsame Politik, der sich noch alle Industrieländer, auch die USA, beim G-20-Gipfel in Toronto (...) ausdrücklich verpflichtet haben.“

US-Notenbankchef Ben Bernanke verteidigte dagegen den geldpolitischen Kurs der Federal Reserve. Die US-Notenbank hatte verkündet, Staatsanleihen für 600 Milliarden Dollar zu kaufen. Nach den Worten Schäubles bereiten die USA der internationalen Finanzwelt damit zusätzliche Probleme. Experten fürchten eine ausufernde Inflation sowie eine Verschärfung der weltweiten Währungsungleichgewichte.

„Wir werden das auch in bilateralen Gesprächen, aber natürlich auch beim G-20-Gipfel in der kommenden Woche in Südkorea mit unseren amerikanischen Freunden kritisch ansprechen“, kündigte der Minister an. Die USA wollen mit dem umstrittenen Manöver die Kreditzinsen senken, um auf diese Weise die schleppende Nachfrage anzukurbeln. Die neue Milliardenstütze der US-Notenbank lässt Europas Währungshüter kalt. EZB-Präsident Jean-Claude Trichet stellte am Donnerstag klar, dass die Europäische Zentralbank (EZB) an ihrem Kurs festhält und den Geldhahn allmählich zudrehen wird. >>> dpa/tma | Freitag, 05. November 2010

QE2 Risks Currency Wars and the End of Dollar Hegemony
THE DAILY TELEGRAPH: As the US Federal Reserve meets today to decide whether its next blast of quantitative easing should be $1 trillion or a more cautious $500bn, it does so knowing that China and the emerging world view the policy as an attempt to drive down the dollar.

QE2 risks currency wars and the end of dollar hegemony. Photo: The Daily Telegraph
The Fed's "QE2" risks accelerating the demise of the dollar-based currency system, perhaps leading to an unstable tripod with the euro and yuan, or a hybrid gold standard, or a multi-metal "bancor" along lines proposed by John Maynard Keynes in the 1940s.

China's commerce ministry fired an irate broadside against Washington on Monday. "The continued and drastic US dollar depreciation recently has led countries including Japan, South Korea, and Thailand to intervene in the currency market, intensifying a 'currency war'. In the mid-term, the US dollar will continue to weaken and gaming between major currencies will escalate," it said.

David Bloom, currency chief at HSBC, said the root problem is lack of underlying demand in the global economy, leaving Western economies trapped near stalling speed. "There are no policy levers left. Countries are having to tighten fiscal policy, and interest rates are already near zero. The last resort is a weaker currency, so everybody is trying to do it," he said.

Pious words from G20 summit of finance ministers last month calling for the world to "refrain" from pursuing trade advantage through devaluation seem most honoured in the breach.

Taiwan intervened on Monday to cap the rise of its currency, while Korea's central bank chief said his country is eyeing capital controls as part of its "toolkit" to stem the flood of Fed-created money leaking out of the US and sloshing into Asia. Brazil has just imposed a 2pc tax on inflows into both bonds and equities – understandably, since the real has risen by 35pc against the dollar this year and the country has a current account deficit.

"It is becoming harder to mop up the liquidity flowing into these countries," said Neil Mellor, of the Bank of New York Mellon. "We fully expect more central banks to impose capital controls over the next couple of months. That is the world we live in," he said. Globalisation is unravelling before our eyes. Read on and comment >>> Ambrose Evans-Pritchard, International Business Editor | Monday, November 01, 2010

Pound Slumps to Nine-month Low Over Fears of a Hung Parliament
MAIL ONLINE: The pound slumped to a nine-month low against the dollar today as fears over a hung Parliament sparked a sterling sell-off.

The currency fell sharply to as low as 1.478 against the dollar, as well as dropping below 1.10 against the euro.

Pressure on the pound comes as the Conservative lead against Labour in the polls narrows - threatening an indecisive General Election result at the same time markets want firm action to sort out the UK's dire public finances.

Mark O'Sullivan, director of dealing at foreign exchange firm Currencies Direct, said: 'Until the political situation in the UK becomes clearer, sterling will remain very, very vulnerable.'

The sudden drop from 1.52 to below 1.48 is the pound's biggest one-day fall since January last year, according to Chris Turner, head of FX Strategy at ING Commercial Banking.

He warned: 'While UK policymakers may have quietly welcomed the pound's recent weakness, they will not appreciate the kind of fast markets that can see a "sell UK" mentality developing.'

Sterling has lost nearly 10 cents against the dollar in little more than a week - hitting holidaymakers in the pocket, increasing pressure on petrol pump prices and adding to import costs for businesses. Read on and comment >>> | Monday, March 01, 2010