U.S. government officials may say they want to keep the dollar strong, but in reality, they prefer a cheap greenback in that it makes American exports more competitive, says Nobel laureate Joseph Stiglitz.
“If you are secretary of Treasury, you have to make a speech about believing in a strong dollar, but you know that no one believes you,” Stiglitz says.
“Right now, it’s not in the interest of the U.S. to have a strong dollar. We want a weak dollar and we want exports,” he told Bloomberg.
Low interest rates and yawning deficits have made the dollar weaker recently, while assets such as gold have risen in value when the world's reserve currency falls.
Nevertheless, others see the U.S. shifting from a historical policy of keeping the dollar strong to weakening it.
“The U.S. seems to have shifted from a strong-dollar policy to a weak-dollar policy,” says Japan’s former top currency official Eisuke Sakakibara, according to Bloomberg.
“This combined with a weak euro has resulted in the appreciation of Asian currencies such as the Indian rupee, Thai baht and Malaysian ringgit and resulted in pressure to appreciate the Chinese renminbi.”
Nevertheless, the dollar will remain the world's reserve currency due to a lack of any alternative, says Sakakibar.
The dollar has gained against the euro in the past few days on concerns if Europe — Germany especially — will not aid debt-stricken Greece.
“German Chancellor Angela Merkel has been very reluctant to extend aid to Greece and until she can be convinced otherwise, a financial aid mechanism for Greece will be difficult to be achieved,” says Kathy Lien, director of currency research at Global Forex Trading, according to CNN.
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