Word: greenbacker
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...something funny happened as the Europeans smugly watched the American behemoth stumble: the not-so-almighty dollar began to rise. Since mid-July the greenback has gained more than 16% against the euro. And why? Because for all its troubles, the U.S. still looks like a safer and ultimately more profitable haven than Europe, with its irreducible jobless rate of about 8%, or those trendy emerging markets that have now crashed back to earth. You would have thought the U.S. would be hemorrhaging trillions by now; instead the rest of the world is learning to love its currency again...
...their money out of the U.S. or the dollar, it would cause a huge upheaval, potentially sending the dollar skidding and hurting markets even further. For the moment, though, China hasn't given any hint that it's unhappy about owning rapidly depreciating U.S.-dollar assets. (The greenback has actually strengthened in recent days, but some caution that this is temporary...
...lending, though the U.S. has been able to do this for some time. With the balance of economic and financial power shifting, it might be less able to do so in the future. Meanwhile, with so much money to invest and a reluctance to abandon currencies that track the greenback, the SWFs of China and other emerging countries have few other places to go - so mutual interests might allow this grand bargain to continue. Washington has so far skirted the complicated issues deriving from the need for further recapitalization of its financial system. But the wealthiest country in the world...
...most international currencies has largely been fueled by domestic American factors - notably the credit tension and business failures in the wake of the subprime crisis, and wider signs that the U.S. has or is entering into recession. But plummeting investor confidence in the American economy has only accelerated the greenback's erosion, which in a little over two years has depreciated from $1.1826 per euro in January, 2006 to Thursday's $1.56. The result is that products manufactured by companies paying euro-fixed salaries and supplies wind up in stores with dollar-denominated price tags looking prohibitively expensive to shoppers...
...exchange rate remains a contentious issue. Since China's currency, the yuan, was delinked from the U.S. dollar in July, 2005, it has appreciated about 14% against the greenback. However, because of the declining international value of the dollar, the yuan has depreciated by some 6.4% against the euro. This has made the Europeans very unhappy. Their trade deficit with China is now also very large...