Russia » Economics
Author`s name Ольга Савка

Weak Dollar Can Make Global Economy Crash

The dollar is struggling for the rate

The dollar rate in Russia remains on the same level so far - 30,38 rubles per one dollar. The American currency has strengthened its position against the euro and the Japanese yen on the Forex market. As far as the rest of the world is concerned, stock markets are quiet, oil prices are going down, everything is predictable in this respect. Apparently, the reports about the optimistic situation with the American economy have finally exerted influence on the American currency. The dollar has been growing against the euro lately and reached the level of $1,173 per one euro. Americans prefer a humble happy end to a global failure.

Specialists say that the growth of the American currency occurred owing to the publication of inspiring economic data in the United States. Apparently, it took a very short time to make the whole world believe American analysts. On Tuesday, the American government published a report about the house-building increase and the increase of the industrial output in May. Yet, one has to mention here that the scandal with the American mortgage giant Freddie Mac is far from being over. The house-building certainly increase in May, but it does not at all mean that everything will be fine in this field in June and especially in July.

The stability of the consuming prices index (CPI) has turned out to be good news for the dollar too. This index is considered to be the main indicator of the inflation rate in the field of retail markets. The CPI has not changed since April, and its basic constituent, which does not include unstable prices on energy carriers and food, increased by 0,3 percent, K2Kapital news agency said. The growth of retail prices by 0,3 percent has allegedly rejected experts' serious deflation concerns.

American analysts have been talking about the threat of deflation for more than a month already. Moreover, the deflation risk has become the factor, that could cause the reduction of the Federal Reserve System rate already on June 24-25. A considerable reduction of the rate (up to 0,50 percent) would enlarge the positive difference between the European Central Bank and the US Federal Reserve System rates. K2Kapital reported that a possibility like that had made the dollar slide against the euro on Friday.

That news appeared on Tuesday, but it failed to provide any support for the dollar. During the evening trading session in New York on Tuesday, the American currency reached the level of $1,1791 per one euro, whereas the previous level on Monday was registered on $1,1835.

On Wednesday, Europeans were trying to comprehend the latest news from the United States. The dollar increased up to $1,176 per euro in the morning. It is worth mentioning here that the tender was complicated with the expectation of the verdict on the case of the most probable successor for the position of the European Central Bank president - Jean-Claude Trichet, the governor of the Bank of France. It became known yesterday that Trichet had been acquitted on charges of false accounting, which means that there are no obstacles to take the office of the ECB president.

Furthermore, K2Kapital said, comments from IMF Managing Director Horst Koehler, which had been published in German newspapers, benefited for the dollar too. Horst Koehler told reporters, if the dollar rate was going to slide even faster, central banks and government of the G-8 countries would have to discuss this situation in detail and take certain measures. The IMF managing director has already said that before that the excessive weakening of the dollar would make the world economy crash, in spite of the fact that the reduction of the American currency was necessary to smooth out the balance of international trade operations.

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