Weakening Dollar

Posted By: Dr. Frugal in Currency on 09/22/2007 at 05:42:11

The US Dollar continued its slide yesterday and finally hit parity with the Canadian dollar. From Bloomberg:

"In the short-term, there is little to suggest the Canadian dollar is going to fall from here," said Shaun Osborne, chief currency strategist at TD Securities in Toronto. "The U.S. dollar is looking generally soft and oil prices are liable to remain strong for a while. The odds favor the Canadian dollar staying firm."

There are a lot of countries whose cash reserves are in US Dollars and practically all countries, at least those with cash reserves, have at least significant holdings in US Dollars. So what does this mean· Each time other currencies rise, the US Dollar can buy less, which is really bad news for a huge importer such as the United States. Both directly and indirectly it translates to higher prices on practically anything we import. With the Euro already getting such a great exchange rate, imports from Europe were already costly but as the US Dollar drops further it's really going to impact things like our imports from China and I think it's safe to say that over the next decade we're going to see a pretty serious rise in the cost of just about everything.


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