And as far as the current course of the dollar against the pound and the euro is concerned, the chances that this depreciation would continue for long also seems quite unlikely. First of all today many developing countries have locked their reserves in dollar and they won’t let the dollar to depreciate for the sake of their own reserves. Secondly, there are vested interests of other countries to keep their own currencies down against the dollar in order to support their own exports. Many argue that interest rates are rising elsewhere and Fed has stopped, which is driving this depreciation. Furthermore, a look at the interest rate differentials, which is currently 2% between US and Europe, shows that the dollar is as attractive as it was in the past.
Well, for the imbalances to improve, fiscal discipline – cutting expenditures and broadening the revenue base – on the part of US is a more desirable option and of course, a less costlier one, rather than a dollar depreciation.
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Source:- IIPM Editorial
Visit also:- IIPM Publication, Business & Economy & Arindam Chaudhuri Initiative
Well, for the imbalances to improve, fiscal discipline – cutting expenditures and broadening the revenue base – on the part of US is a more desirable option and of course, a less costlier one, rather than a dollar depreciation.
For complete IIPM article click here
Source:- IIPM Editorial
Visit also:- IIPM Publication, Business & Economy & Arindam Chaudhuri Initiative
