Dollar’s Prestige Falls

Since the current global recession began in 2008 the US dollar has not only fallen in value but has also suffered a decline in prestige. Many nations are seriously discussing replacing the US dollar as a reserve currency. While the dollar declines against most major currencies China and other nations with emerging economies are calling for an end to the greenback’s dominance in global trade. Venezuelan President Hugo Chavez, no friend of the United States, stated Saturday that Venezuela, Russia and Iran have proposed replacing the dollar as the currency used for the oil business. Chavez stated, “We’ve been talking about this in OPEC. Venezuela agrees and there are other countries, such as Iran and Russia that have also proposed this idea.”

China’s Currency Undervalued

China has joined other nations and is proposing replacing the US dollar with a basket of currencies. Many Middle East nations involved in the oil trade support the idea. Instituting a new reserve currency would pose economic, diplomatic and economic challenges which would likely take years to resolve. China has undervalued their currency since 1995 making their products cheap in the US but at the same time putting US products out of the reach of Chinese consumers.

Concerns About US Debt

China enjoys a huge trade surplus with the US that creates growth and millions of jobs in China. Unfortunately that same trade surplus creates huge deficits and unemployment in the US. Massive US deficits caused by the financial meltdown and the bailouts have put downward pressure on the dollar in currency markets. Chinese officials have expressed concerns about rising US debt.

S American Nations Call For Dollar to be Replaced

At a meeting of Bolivarian Alternative for the Americas (ALBA) participating nations announced plans to create a single currency which would replace the US dollar. Participating nations include Bolivia, Cuba, Ecuador, Nicaragua, and Venezuela. A Russian delegation also attended the meeting. Russia has been in the forefront of the move to replace the US dollar as a global reserve currency. At the present time the role of the US dollar as a reserve currency seems relatively secure but the growing movement to replace the dollar leaves the currency’s future in doubt.

Quick Forex Tip: Euro currency trading requires a lot of research and investors must keep track of economic information from the twelve member nations. The economy of just one nation can affect the euro’s exchange rate.  In 2010 political uncertainty and deficit concerns about Greece caused the euro to fall considerably in global forex markets. Euro currency trading can be exciting and very lucrative for investors who have done their homework.