Author`s name Michael Simpson

No More Chance for Dollar

The European Union and Russia are playing against the US currency
It was just a short time ago that everybody was hoping the dollar had finally stopped its fall and would soon strengthen its position relative to the euro. Analysts explain that the slight rise in the value of the American currency was connected with the desperate hope of world markets a better positions for the dollar.

There is a suspicion that the European Central Bank may play a dirty trick on the US currency. Traders are afraid, and not without reason, that the Bank may drop the rate below today's 2.5%. What is more, many European economists don't think that the euro's excessive strengthening poses a serious threat to the economic stability of United Europe. Therefore, the Europeans are treating the dollar’s decline as a nice opportunity to improve the economic situation in Europe. If so, reduction of the European Central Bank's rate will be treated as one more stimulus to revive the economies of the EU countries.

Otmar Issing, member of the Executive Board of the European Central Bank, thinks that dollar rise with respect to the euro is not dangerous and gives no reasons for anxiety. He says that further strengthening of the European currency gives the European Central Bank a wider opportunity maneuvering in monetary policy and produces inflation curbing. Many leading European experts share this opinion, which is rather unfavorable for the dollar.

The US dollar is facing a rather complicated situation in Russia. According to the results of the United Trading Session of the inter-bank currency exchanges, today the average weighted euro came to 36.5116 rubles per euro, thus breaking the record of 36.0948 rubles per euro fixed a day before. There is no reason to think the situation may change before next week.

Experts say that traders in Russia are playing against the dollar more actively, as they expect to profit considerably from the dollar’s decline. Against the background of the Central Bank’s inertness (the Bank is still reluctant to support the dollar), it looks as if a decision has been made to reduce Russia's dependence upon the American currency. Although the dollar is supported by the Asian countries, the situation on the world markets is unfavorable for the dollar, which in its turn allows the euro to break new records one after another. If Russia has finally yielded to the EU’s persuasion and joined the anti-dollar struggle, the situation may have far-reaching consequences not only in the outside world but in Russia as well.