And the dollar continues on down. The Economist scratches its head and figures ‘well, it had too’…
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Plumbing the depths
Dec 29th 2004
The dollar has hit another record low against the euro. It is set for further falls against major currencies in the coming year, even though American interest rates will rise
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I’m posting this out of general interest, essentially The Economist thinks the dollar is ripening for another drop akin to the one in the fourth quarter of 2003.
One of the main factors is inorder for foreign currencies to remain weak comparatively, they buy up all our bonds. This keeps exports cheap and more competative in our markets, but has the nasty side of inflation in their home countries. China has been mounting an assult of sorts inorder to tame their continued growth at 11%, but without any real bankning infastructure – it is a difficult task to say the least. Japan on the other hand is a little jublient that the inflation is carrying them out of a decade of deflation, and certainly keen on not returning any time soon. Both countries have experienced a nice spurt of growth in the past 6 months but if inflationary pressures get too high at home, they stop buying our $, and down we go.
Keep an eye on it
Jul 8th 2004
From The Economist print edition
After a buoyant start to the year, the dollar seems headed for a tumble
THERE was a time, not long ago, when economists and those who dabble in the foreign-exchange market could find scarcely a good thing to say about the dollar. Last year, John Snow, America’s treasury secretary, even managed to transform his country’s long-standing strong-dollar policy into a weak-dollar one. All this greatly irritated Europeans, especially; as the euro rose, international meetings of the great and the good were dominated by cross discussions about the beleaguered buck. Newspapers, including this one, were full of gloomy headlines suggesting that the greenback would, indeed should, fall farther.
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The ever serious minds at the Economist have released the latest in the Big Mac Index. Of note is they are starting a Tall Latte Index; Starbucks is now serving in 32 countries round the globe (the mega chain opened its first shop in France on January 16th, 2004). Both indecies use purchasing power parity (PPP) as a way of comparing bundels of goods in seperate countries. The idea being that in the long run exchange rates will move to equalize the prices, a nifty way for telling which currencies are over or undervalued.
*********UPDATE**************
Jeremy Avnet knows an excellent reason for the problems caused by all those Big Macs eaten around the world.