October 15th, 2010 10:03 AM by Lehel S.
Good thing the Federal Reserve and the Obama administration want a weaker dollar. They’re getting it in spades this week.
In Asian trading early Thursday the Australian dollar was nearing parity with the U.S. buck for the first time since the early-1980s. One Aussie dollar now costs 99.7 U.S. cents, up from 81 cents as recently as early June. You'll pay up to go Down Under.
Also Thursday the U.S. dollar fell to a record low against the Singapore dollar, with $1 U.S. buying 1.293 Singapore dollars, down from 1.303 on Wednesday and 1.405 at the start of the year.
Singapore’s central bank, which controls the currency’s value, said it would allow a faster appreciation against the U.S. dollar as a way to try to damp domestic inflation. A stronger currency makes imported goods less expensive for a country’s consumers and businesses.
But other countries, notably Japan, Brazil,Thailand and China, have been fighting currency appreciation, trying to keep their own exports affordable abroad.
Japan’s moves to try to stop the yen from rising further against the dollar have been to no avail: On Thursday the dollar slid to a new 15-year low of 81.28 yen from 81.77 on Wednesday.
The euro also is on a new hot streak, rising to a nine-month high of $1.408 from $1.396 on Wednesday. Note, though, the euro still is below its record high of nearly $1.60 reached in April 2008.
The dollar has been slumping against a broad array of major and minor currencies since May, in part a victim of the U.S. economy’s struggles and our rock-bottom short-term interest rates. Thanks to its robust economy, Australia’s benchmark short-term rate is 4.5% versus nearly zero for the U.S. benchmark. By that measure, money is treated a lot better there than here.
What’s more, lately the world has perceived that dollar weakness is an important part of U.S. economic policy -- a way to raise the cost of imports, while lowering the cost of American exports for foreign consumers.
And with the Federal Reserve poised the flood the financial system with more dollars via Treasury bond purchases, it’s clear the central bank is happy to let the buck’s value go.
This is all good for U.S. exporters but it’s a bummer for Americans who will be traveling overseas soon, however few they may be these days. Our national purchasing power is dwindling -- while to foreigners, America increasingly is on sale.