Tuesday, February 9, 2010

Dollar & Other Currencies

If you are very concerned about the prospects of the dollar, then the following news is definitely relevant to you. Star economist Nouriel Roubini put forward his views and Dan Weil reported on them yesterday for the concerned investors.

The dollar’s recent rally, which has taken it to a six-month high, will soon fade against Asian and commodity currencies, says star economist Nouriel Roubini.Commodity currencies include the Brazilian real, Canadian dollar and Australian dollar.He anticipates a 15 percent to 20 percent drop by the greenback against these currencies in the next two to three years.And what will cause the move? “I see anemic recovery of economic growth in the U.S., and the U.S. current account (deficit) is still very large,” Roubini, a professor at New York University, said at a Moscow conference, according to Bloomberg.“In the next two or three years, the dollar has to weaken further on a trade- weighted basis.” As long as commodity prices remain high, countries whose economies are based on commodities will see their currencies rise, he says.As for the U.S., “There’s going to be better economic news for a couple of quarters due to temporary factors, such as restocking, fiscal stimulus, and base effects,” Roubini said.“In the second half, economic weakness is going to reappear again. On a trend basis, the dollar has to weaken.” If Roubini is right about the dollar dropping versus the renminbi, the U.S. will benefit, hedge fund legend George Soros told CNBC.“It would help by making U.S. exports more competitive to China, but also would help to introduce an element of inflation in the U.S. In the current circumstances that would be very helpful.”

The picture shows some big bike travellers who were on 21-day touring Borneo Island last year. The group stopped over in Sibu for one night and stayed in Premier Hotel. When riding through the town, the team was escorted by two traffic policemen.

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