The falling dollar

From the UK's Independent:

Transatlantic travellers hoping to cash in on a $2 pound for the first time in 14 years should enjoy the good times while they last, because a tumbling dollar could start an economic whirlwind.

... recent comments by the Chinese central bank about the need to move into other currencies helped trigger the start of the dollar's recent slump a week ago. Private investors have also be keen to buy into US Inc but the prospect of further falls in the dollar could encourage them to cash in their chips now, pushing the dollar down further and creating a vicious cycle.

In its most recent forecast the International Monetary Fund (IMF) warned that if that happened there would be a "disorderly unwinding" that would see a rapid fall in the dollar, volatile movements in the financial markets and a "significant hit" to the world economy. A weak dollar would put up the prices of imports, discouraging Americans from spending. It would ALSO drive up inflation and force the US Federal Reserve to raise interest rates. That could transform its stagnant housing market into a financial disaster zone. A consumer-led recession would hit those countries that have done well by selling to Americans.

The dollar fell another four tenths of one percent yesterday against the Euro. A Euro now buys $1.33. When I was in Europe a few years ago, the dollar was worth a bit more than one Euro.