Recent currency market moves have caused the dollar to resume its pre-eminent position in the financial system, but it is less to do with the dollar, and more a call on the euro.
Having once looked set to replace the dollar as the world’s reserve currency, the euro is now weakening against almost all other global currencies, its credibility undermined by last month’s €750bn EU rescue package that effectively transferred the creditworthiness of core European nations to peripheral countries that do not deserve it. A falling euro means a rising dollar and an overly strong currency is not what the US needs at the moment, as US inflation is declining and further dollar appreciation will exacerbate this deflationary trend. Deflation is the one thing capitalist economie...
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