The dollar has once again set a new record low against the euro today, with the euro moving as high as $1.4966 earlier in the day. In Asia, the dollar also fell sharply, falling to below 108 yen, marking a two and a half year low against the yen.The dollar has definitely been in trouble lately. The current slide really gained steam back in August as the market started to realize the effect the subprime mortgage crisis was going to to have on the economy. The dollar has been in a literal free fall ever since.
The dollar is not only reacting to the mortgage concerns, but recent interest rate cuts by the Federal Reserve are also adding to the dollar's weakness. So far this year, the Fed has already cut rates twice, and as Wall Street continues to gauge the impact of the mortgage crisis on the overall economy, analysts now expect to see at least one more rate cut in the near future.
Just how low the dollar will continue to fall remains to be seen, but for now it looks like the worst has yet to come. For a better understanding of just how hard the precious Greenback has been hit lately, take a look at a current chart for the US Dollar Index:
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
11-23-2007 @ 9:04AM
Steven Danis said...
The free falling dollar wouldn't necessarily be such a bad thing if this country was a net exporter. The almost worthless dollar has now helped to revive what's left of our industrial base and given a big boost to the agricultural sector. Unfortunately, this country is the world's biggest importer, and routinely runs trade deficits of 60 to 70 billion dollars in a typical month. The biggest problem right now is that, with oil demand and supply in such a tight balance, that we could find that the countries we depend on for better than 60% of our petroleum needs will start to refuse payment in dollars and instead demand payment in hard currencies. All the more reason that we had better get serious about developing alternatives to imported oil, and sooner rather than later.
11-23-2007 @ 11:49AM
william lindblad said...
What happens next depends on Fed action.
Do they continue to cut to sooth wall streets emotions? Do they stand pat and stop further monetary decline? As the other comment aptly points out - there are trade deficits and the position of the dollar as the "reserve" currency to be considered. The disparity ratio of today will start of effect healthy economies at present levels and pushing the whole world into slow growth or recession is a bad move. Whatever we have at home in the financial sector will certainly be a drag for quite some time, but it is pointless to involve everyone worldwide any more than already exists. If this gets out of hand and rampant inflation enters the pictlure a disaster will ensue.
11-23-2007 @ 8:54PM
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12-11-2007 @ 10:24AM
Anton said...
It sounds like the time has come for the dollar to start paying the piper.