According to senior IMF officials the decline in value of the US Dollar will make a positive contribution towards moderation of global economic imbalance – but the effect will be only partial. According to them, US Dollar today is the closest to its medium-term equilibrium value in a decade but Euro has borne a large share of the overall adjustment in the dollar and as a result has itself become overvalued. They have argued that the other economies with surplus current account positions should now consider revaluing their currencies. One such country is China which according to them is still undervalued not withstanding the fact that the currency has appreciated against the US Dollar recently. Similarly, the major oil exporters like Saudi Arabia also are due for such revaluation and it may be worthwhile for them to consider breaking the peg with Dollar.
The huge current account deficit run up by US is going to pose real problem to the US administration if the Euro continues to gain in importance. On 30 April 2008, Iran has switched over to trading its crude in Euro instead of US Dollars there is possibility of others also joining the bandwagon which must be causing major worries for the US government.
The huge current account deficit run up by US is going to pose real problem to the US administration if the Euro continues to gain in importance. On 30 April 2008, Iran has switched over to trading its crude in Euro instead of US Dollars there is possibility of others also joining the bandwagon which must be causing major worries for the US government.
Contributed by:
Prof. Bikramjit Sen
(Globsyn Business School)
Source: http://www.ft.com/cms/s/0/1cec7070-5811-11dd-b02f-000077b07658.html
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