Is the Dollar Really Going Out of Style?

Right now the dollar is being pummeled by traders, but its real future lies in the hands of the Federal Reserve.

Reports of the dollar’s imminent demise aregreatly exaggerated. Since its most recent peak in March ofthis year, the greenback has fallen about 10% on a trade-weightedbasis. One-on-one against the euro, the buck is down 15% over the sameperiod, but even by that measure, it remains well above its April 2008record low of $1.60 to the euro.

It would take a far more rapid sell-off to suggest a genuine currency crisis. “If the dollar’s decline got really out of hand, say 30% in a relatively short time, it would become very hard for the U.S. to roll over its debt at current interest rates,” says Niall Ferguson, a Harvard University professor who specializes in financial history.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription

Why am I seeing this? Find out more here

Associate Editor, The Kiplinger Letter