The Dollar

[Zynx]

I'm conflicted on where the dollar is going to go relative to the Euro and the rest of the world currencies for that matter. One the one hand, rising U.S. interest rates and relatively strong economic growth compared to Europe mean that we should be seeing a rise in the dollar, which has been the case over the past few weeks. However, at the same time we have massive budgetary and current account(trade) deficits that hurt the dollar.

Now, when you have two conflicting sets of factors going on here, it is very difficult to make a decision where to put one's money, particularly with regards to international funds. I personally think that the dollar has had the vast majority of any correction it is going to have, particularly since the Europeans don't look like they will be raising interest rates anytime soon with their weak economic growth and the fact that they have huge budget deficits as well. What do the rest of you think?

[silverlib]

1. China

holds my fear of a declining dollar. It is not what we owe, as much as who we owe. The Europeans have been taking care and putting money into ecumenic problems in their countries, while the US is putting money into the military complex. Also, if OPEC switches to Euros and this becomes the "money of choice," I think the dollar is doomed.

Let me state that I am for from being an economist and am not very suited to intelligent conversations in these matters. I may just be listening to parties on the wrong side of this question.

[Zynx]

2. Very interesting insights.

I hadn't really considered that in my analysis.

[silverlib]

3. What do you think about this development?

Newly appointed World Bank President Paul Wolfowitz welcomed China's stunning economic development on Friday and said the world should engage with the Chinese even if they disagreed with their politics.

In his first radio interview since he was confirmed in the job, Wolfowitz told the BBC that "the goal of poverty reduction is as valid in China as it is elsewhere".

Asked if the World Bank would attach strings to its dealings with China to encourage it to embrace democracy, Wolfowitz said: "I don't believe it should."

"The economic development of China is a positive development ... and something that the United States and the world should welcome and work with," he added.

link

I may be reading more into this than what is there - but is this intended to encourage China to help keep a stable dollar? If this is true, it could work, but at what price?

I would love to hear your thoughts.

[Zynx]

4. We really have to watch this more before making a judgement.

I'm not sure exactly what will happen with China so it is difficult to predict anything.

[silverlib]

5. New Dollar Prediction

April 29, 2005
Times
By Peter Klinger



THE price of gold could hit a 22-year high of $500 per ounce within the next year on the back of concern over a substantial slowdown in the US economy, a leading precious metals consultancy said yesterday.

GFMS said that global economic conditions over the coming 12 months were likely to conspire to force an “event-driven spike” in the gold price, propelling it to the highest levels since 1983.

Gold hit $452 per ounce — a 16-year high — late last year as investors bought to protect themselves against the plummeting US dollar.

The price has since eased and yesterday ended London trading at $431.90, off 20 cents.

http://www.timesonline.co.uk/newspaper/0,,174-1589971,0...