Dec 2, 2010

The Future of the U.S. Dollar

Chris WoodwardBy Chris Woodward

Now that China and Russia have agreed to trade with non-American dollars, one financial expert is addressing what that means for U.S. currency.

2010 has not been a good year for the U.S. dollar as its value remains weak and concerns about inflation continue. Some experts say inflation is already here, so worries are stirring about what that means for the agreement between China and Russia.

"It could catch on," warns Dan Celia, host of American Family Radio's Financial Issues program. "I don't think it will, but it could catch on to other nations. And trading in another currency, that will drive the dollar lower, and, in fact, [it] could potentially drive the credit rating of the United States and the dollar lower as well."

He believes the real question is whether this is merely a political move to show frustration at the U.S. for failing to improve the dollar. As for the financial situation in Europe, Celia points out that the euro's plummeting value helps the dollar.

"That helps our dollar in relationship to the euro, but the euro problems are very deep; it's a lot wider and deeper than we think," he explains. "We could see the euros trading in the $1.20 range for the first part of the year, easily."

If so, that would put the euro at one of its lowest levels since the currency began.

Related Links

Peter Schiff: US dollar has lost its strength - RT America
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US dollar falls against euro after ECB move - Channel News Asia
Volcker Says Dollar's Role in Danger as U.S. Influence Declines Globally - Bloomberg
UAE says Gulf should review dollar peg - Daily Star
Fed’s QE2 Carries Risk of Accelerating Inflation, Yardeni Says - BusinessWeek