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Author`s name Dmitry Sudakov

US dollar catches second breath

The world has been suffering from the US economic mess for almost a year. It entails numerous problems in other countries as well. In Russia, the US crisis was materialized in the devaluation of dollar savings and more expensive loans. The head of the US Treasury stated officially that “the lowest point has been passed” and there will be fewer problems in the future. Does it mean that the US dollar will retrieve its international value?

Vladimir Kvint, the head of the Finance Strategy Department of the Moscow School of Economics (MSE) believes that the dollar will start to rise.

“My forecast for the forthcoming year will be as follows: the dollar will go up by March-April of 2009. Gradually it will restore its value. It is unlikely to completely rehabilitate, though,” he said.

The recent decrease of the refinancing interest rate (the rate for loans to commercial organizations) in the USA (from 2.25 to 2 percent) will incrementally strengthen the dollar. The USA had the same rate in 2002, which facilitated the economic resilience after the September 11 attacks. The lower rate will enable banks to give new loans to people. The latter will in their turn be able to pay back their original loans and thus reduce the mortgage crisis.

Despite expectations of many analysts, the economic recession never started in the USA. Why is it so important for the rest of the world and for Russia in particular? It is significant because Russia keeps 40 percent of its currency reserves in US dollars. Many Russians still prefer to save their money in dollars. Under inflation conditions it is essential to avoid the devaluation of these reserves.

What will it entail? First of all, the gradual decrease of gold prices, because the dollar is more available now due to its price and there are prerequisites for its growth. Currency profiteers will not be able to derive profit from precious metals and will prefer to invest in the dollar instead. As a result, the demand for gold will go down and its price will decrease.

It is clear that fluctuations of the dollar cost are inevitable. Common people should not worry about it. For them it is important to keep their dollars until better times. If they have dollar credits, it is better to repay debts as soon as possible. If they have none of the two, they should keep their savings in rubles and euros. The ruble is considered to be a promising currency. There are preconditions for a lower price of the euro, such as the high unemployment rate in Europe.

Source: agencies

Translated by Julia Bulygina
Pravda.ru

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