The US dollar may rise in the coming months in response to the weak economy of the global economy. The world may finally embrace the United States dollar to purchase goods and services for its use, which may have long been the case with other countries like China and India.
Many have speculated that the global economic recovery has already begun, but the recent jobs data may have delayed the momentum of the economic growth for a little while longer. We have been following the ongoing events for quite some time, and the alarming unemployment numbers seem to have finally pushed the economy into overdrive.
Job losses were up almost fifty thousand. These numbers come from the Bureau of Labor Statistics (BLS). The Bank of America Merrill Lynch believes that at least four million American workers are out of work right now.
According to the BLS, while nearly all of the positions lost in this recession were in traditional full-time jobs, there was a large amount of part-time employment as well. This means that the global economy is still hurting from the loss of the manufacturing base, and thus, it seems that the dollar is likely to rise at least a few cents in the coming months.
Market fluctuations will drive the dollar higher or lower. With a weak economy, there will be a lot of fluctuation in the exchange rate, and may continue to do so in the coming months. However, it will be a while before we see a full-scale recovery.
So, what about the falling unemployment rates? The fact is that while millions of people are working again, this fact doesn’t necessarily mean that they will keep their jobs for very long.
There is a consensus that this economic recession will not be over for many years. In fact, many experts believe that it could go on for even a decade. As such, the dollar will continue to rise as long as the current economic conditions are still prevalent.
Additionally, the next global economic recession will not be any different than the one we are currently experiencing. Thus, investors will continue to look for safe havens for their assets. Unfortunately, these safe havens are usually foreign currencies, which are much more difficult to buy and sell than U.S. dollars.
Indeed, it will be quite some time before the US dollar will return to its former value. For a while, the euro may reach parity with the dollar, which would still result in a rise in the value of the euro versus the dollar.
However, this is a great danger, because the strong dollar would force the price of European goods to go down, but the weak euro would force them to go up. Thus, the European economy will experience a double whammy.
Bane for American companies would ensue, as they will be forced to use European money to pay for their imports. Then the weaker euro would force them to buy European goods at much higher prices, leading to even more job losses, even more currency devaluations, and even more turmoil.
With all of these things considered, the US dollar will continue to appreciate, and even make a dramatic rise in value, as long as the current financial turmoil continues. For a while, the currency is likely to climb, but eventually it will fall back down.