It was just last year that Barack Obama linked the dollar’s steep slide to imbalances in the U.S. economy and Bush administration policies.
But, it will be hard for Barry to blame Bush now.
This week the dollar dropped the most against foreign currencies in 25 years.
Hope. Change. Poverty.
The dollar dropped the most against the currencies of six major U.S. trading partners since the Plaza Accord almost a quarter-century ago as the Federal Reserve’s plan to purchase Treasuries spurred speculation that it’s debasing the greenback.
“What it introduces is the problem of the currency to the extent that the Fed is buying what isn’t desired by foreign holders,” said Bill Gross, co-chief investment officer of Pacific Investment Management Co., in an interview on Bloomberg Television on March 19. “The Fed can keep interest rates where they want to keep them, at least for a 6- to 12- to 18-month period of time, but it will have consequences down the road.”
The U.S. currency weakened beyond $1.37 per euro this week for the first time since January as the central bank’s decision to increase its balance sheet by $1.15 trillion lowered yields, making American assets less attractive. The Norwegian krone and the New Zealand dollar rallied as the Fed’s move spurred advances in commodities.
The dollar depreciated 4.8 percent to $1.3582 per euro yesterday, from $1.2928 on March 13. The U.S. currency touched $1.3738 on March 19, the weakest level since Jan. 9. The dollar also fell 2.1 percent to 95.94 yen from 97.95. The euro increased for a fifth week versus the yen, gaining 2.9 percent to 130.29 after touching 130.49 yesterday, the highest level since Dec. 18.
The ICE’s trade-weighted Dollar Index dropped 4.1 percent this week to 83.84, the biggest decrease since the week in September 1985 when the U.S., U.K., France, Japan and West Germany agreed at New York’s Plaza Hotel to coordinate the devaluation of the dollar against the yen and deutsche mark.
Meanwhile, a U.N. panel will recommend this week that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies.