Once upon a time, weren’t we able to buy more stuff with our dollars? The U.S. dollar, along with related exchange traded funds (ETFs), has dropped in value, but it still hasn’t lost its appeal.
According to Bloomberg Correlation-Weighted Currency Indexes, the U.S. dollar is about as valuable now as it was back in 1975, writes Ben Levisohn for Bloomberg. Since November, the U.S. dollar has appreciated 6%, but it still depreciated 12% in the first 11 months of 2009. [U.S. Dollar ETF.]
Still, demand for the dollar has been on the rise, with investors outside the U.S. hoarding $3.6 trillion in 2009 through November, up 17%.
Barclays Capital economists estimate that U.S. GDP may expand 3.6% this year, as compared to 2.5% for the rest of the developed world, and 3.1% in 2011, versus 2.6% in other developed countries.
The U.S. government debt increased dramatically during the recession and Moody’s Investors Service has warned that the U.S. government is in danger of losing its Aaa bond rating. Moody’s estimates that the ratio of debt to GDP in the U.S. will distend to a 76.5% in 2019, compared to an earlier forecast of 70.1%. The Congressional Budget Office expects American debt to hit 65% of GDP in 2010.
The dollar came under fire and there have been talks of the dollar losing its reserve currency status. However, other currencies don’t have the necessary liquid markets and low capital controls to take up the mantle of being a reserve currency. [Currency ETF Relationships.]
For more information on the U.S. dollar, visit our U.S. dollar category.
- PowerShares DB U.S. Dollar Index Bullish (NYSEArca: UUP)
- PowerShares DB U.S. Dollar Index Bearish (NYSEArca: UDN)
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.