Is The U.S. Dollar Strong?

Despite the push of most analysts and some political leaders for the growth of the US dollar, Americans generally do not think that the US dollar is strong. During the 2008 – 2009 bear market, a growing number of Americans therefore began to doubt the traditional strength of the US economy. The US dollar did not regain its former strength but continued to fall against other major world currencies even after GDP growth hit 5.2% in the third quarter of 2013. For example, the Euro – Euro currency pair today equals 1.2914 USD, when in late 2013 it was trading at 1.2978. Investors are therefore clearly deciding that the US dollar is not believed to be adequately strong by most analysts.

Having the same arguments, the Japanese Yen and the Euro – Yen are still seen as relatively strong currencies. During the last couple of years, analysts largely agreed on the strength of the Chinese Renminbi (Yuan). After China’s slow growth and some of the blips in global economy, most economic experts had believed the Chinese Renminbi to be relatively stronger.

As it is becoming more clear that the US dollar is gradually losing its popularity, strong economies like Germany and the UK continue to see appreciation in their currency’s purchasing power while the US dollar continues its decline. Even though the Euro is havingconsiderable stagnation when compared to the dollar, investors consider it to be better to hold the Euro rather than the US dollar. This is the major reason why there is still significant interest in the Euro despite that the critical economy of the European Union has not improved as expected.

Despite the mixed signals in the stock markets from the US Treasury, analysts and investors are increasingly holding on to the dollar despite its declining status. “Currency specialists who specialize in riskier aspects of currency issues are clearly feeling bullish about the euro,” Michael Wool Cain, Global Payments Ltd’s Head of Strategic Planning, told Bike Worth publications. “Investors are increasingly willing to take higher levels of hazards and move into higher investment- quantum quantities on currency futures and options.”

diminishing confidence on the US economy is a key reason as to why the American dollar is unlikely to retain its status as the world’s reserve currency. Even with today’s dismal economic conditions, the US economy is the world’s biggest and most liquid market. However, when it comes to the Euro, Barings Bank recently issued a report stating that the Euro is on shaky ground. “Euro zone sovereign debt ComEuro (debt issues) and budget deficits could spiral as much – or more – into sovereign debt trouble as the U.S.”

The declining economic outlook for the Euro is not only limited to a weak global economy. In the wake of the financial crisis in Europe – and the huge international financial bailouts that were granted to rescue many European banks – many investors are now doubtful about the strength of the Euro. This is why the US dollar continues to be the major reserve currency across the world. Even with China’s economic growth and the anticipated reemergence of the Chinese Renminbi, financial experts do not expect the dollar’s days to end anytime soon.

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