US Recession – 3: Dollar Value

http://www.economist.com/finance/displaystory.cfm?story_id=10924165

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Divine intervention

Under the right conditions, currency intervention can work. So is it time to support the dollar?

Indeed, the main cause of the dollar’s recent slide has been the ECB’s refusal to cut interest rates (because of its inflation concerns) while the Fed is slashing rates to support growth. Or to put it another way, the weak dollar is consistent with the economic fundamentals, namely that America is in recession whereas the euro zone is still growing. The ECB will want to see inflation easing and more evidence that growth is slowing before it cuts rates. There is also little chance right now that the American government would join in any action to push up the dollar, because the cheap currency is giving a helpful boost to exports…