Word: dollarized
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Dates: during 2000-2000
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Still there is a growing suspicion in global financial circles that the dollar may be at its peak and poised for at least a slight decline. While the Federal Reserve is trying hard to slow the U.S. economy, growth is picking up in other parts of the world. Output is forecast to rise about 3% this year in "Euroland" (the 11 nations that use the euro as a trading currency). Japan is crawling out of recession, and though growth there is feeble, it has still been enough to hold the yen steady against the dollar. Europeans point out too that...
What has happened is the exact opposite. Far from becoming dangerously weak, the dollar, if anything, may be a bit too strong. So far this year it has risen about 6% on average against the currencies of the 19 most important U.S. trading partners. In May the greenback hit a four-year high against the British pound, while the euro, introduced 17 months earlier at a price of $1.17, fell briefly below 90[cents...
There are reasons, however, to think--and devoutly hope--that any slide in the dollar will be modest and gradual. Though the gap is shrinking, economic growth will remain faster in the U.S. than in Europe--and certainly than in Japan--for this year at least. Asian countries are recovering rapidly from their 1997-98 debacle; forecasts for expansion this year range from 3.4% in the Philippines to 6.8% in Malaysia. But Asian economies must reduce a huge overhang of debt before they can siphon away any investment now going...
...more volatile. But Lawrence Kudlow, chief economist of CNBC.com points out that the 37% nose dive in the NASDAQ index from its March 10 high to its May 23 low did not appear to scare away much foreign investment--at least not enough to make any difference in the dollar's price. "I was holding my breath on that one," says Kudlow...
...small and orderly decline in the dollar would not be at all unwelcome to most economic analysts. It would help U.S. exports, by making them cheaper in terms of foreign currencies, and bring U.S. trade accounts closer to balance. A sudden and sharp drop in the buck's value, however, would be a very different matter--in fact, a disaster. It would greatly worsen U.S. inflation by driving up the price of imports. Foreign goods and services directly account for about 15% of all American gross-domestic purchases and have a real influence far beyond that because so many American...