Thursday, September 20, 2007

Dollar Breaks 1.40 Level Against Euro

As a result of the Fed's rate cut, the dollar fell to a new record low against the euro, so that a euro now costs more than $1.40 for the first time ever. It also fell to 6.57 Swedish kronor, the lowest level against the Swedish krona since the 1992 devaluation of the krona.

Another key psychological barrier likely to be broken soon is the 1:1 parity level against the Canadian dollar. The Canadian dollar at US$0.9913, the highest in more than 30 years, and it seems likely that soon the Canadian dollar will have the same or slightly higher value than its U.S. counterpart. As late as in early April, a Canadian dollar cost only 87 U.S. cents, but have risen 14% in less than 6 months. Given the fact that the United States is still Canada's dominant trading partner this is going to be disliked by many Canadian exporters -and import-competing domestic firms- and these dramatic fluctuations is of course what leads some Canadians to call for a North American Monetary Union.

However, despite the damage to exports that these sharp currency movements create, Canadians might still benefit from having their own currency to the extent it allows them to pursue less inflationary monetary policies than the Fed would have imposed on them.

The U.S. dollar also fell below the key 40 barrier against the Indian rupee today. It will probably fall below 7.50 against the Chinese yuan soon. That seems in a way even more certain than the continued decline against other currencies although the timing is less certain as Chinese authorities have increased the irregularity of the yuan's appreciation against the U.S. dollar.

Meanwhile, the one honest currency of the world, gold, continues to soar to new post-1980 highs against the U.S. dollar.


Blogger morrisonbonpasse said...

Currency fluctuations such as we see between the U.S. and the euro and among all countries or monetary unions around the world are wasteful, risky, and unnecessary.
Instead of watching the dangerous competition to see which is the global reserve currency de jure, we need a Single Global Currency, managed by a Global Central Bank within a Global Monetary Union. (See
If the euro can be used successfully by 13 nations, soon to be 15, and later 22 nations, why not move to a currency to be used by all 191 members of the United Nations for international transactions AND for internal transactions such as the payment of taxes. Led by the example of Europe, regional monetary unions are being created and expanded around the world. One possibility is a North American monetary Union, but that will not happen until the U.S. Federal Reserve shows a willingness to include the Canadians and Mexicans at the monetary policy decisionmaking tables - and that will happen when the custodians of the US dollar finally see that they need partners in order to avoid or slow down the pre-eminence of the euro.
However, as good as such regional unions may be, they still exist in an expensive multi-currency world. Their benefits will be dwarfed by the benefits of a Single Global Currency.
The implementation of a Single Global Currency will save the world approximately $400 billion in foreign exchange transaction costs, and will eliminate currency crises and balance of payment problems and eliminate all the currency fluctuations which bedevil our globalizing world. Also, a Single Global Currency would increase the values of assets in countries where currency risk is presently high, and the citizens of those countries would be less likely to send their money to safer financial centers.
The goal of the Single Global Currency Assn. is a Single Global Currency by the year 2024, which is only 17 years away. Daunting as that goal may seem, please remember that in 1985, when the euro was still 17 years away from the pockets of Europeans, the prospects for ever abandoning the deutschmark, franc and guilder were low. Also, the Berlin wall was still standing and the Soviet Union loomed large.
We need to start researching and planning now for a Single Global Currency to be managed by a Global Central Bank within a Global Monetary Union.

2:22 PM  

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