Monday 5 May 2008

Is the Greenback Due for a Comeback?

SPIEGELONLINE INTERNATIONAL: After years of weakness, the US currency may be at a turning point. Who would gain -- and lose -- from a greenback comeback?

There's a growing sense among currency traders that the US dollar might finally stop its long slide against other major currencies.

The euro almost hit $1.60, a record high against the dollar, on Apr. 22, the same day the dollar index -- a measure of the greenback against a basket of major currencies -- also showed record weakness.

But since then, the buck has been on a modest upswing. The euro traded at $1.54 on May 2, and the dollar index is 3 percent off its lows. "We think the dollar is carving out a bottom," says Meg Browne, senior currency strategist at Brown Brothers Harriman.

The main cause of the dollar's recent strength is the same reason for its rapid collapse over the past year: the US Federal Reserve. The dollar's value suffered when the Fed cut interest rates rapidly to stem the financial crisis and prevent a US recession. The turning point may have been on Apr. 30, when the Fed lowered the fed funds rate target by a quarter-point, dialing back on its policy easings after a series of half-point cuts. Many believe the central bank is putting its rate-cutting on hold for now. Has the Dollar Hit Rock Bottom? >>> By Ben Steverman

The Dawning of a New Dark Age (Paperback – USA)
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