President Obama sees smooth sailing ahead for the dollar.
That runs counter to the view of many experts, who see the currency sliding in the years ahead as a result of the Federal Reserve’s decision to print trillions of new dollars.
The dollar is “extraordinarily strong,” Obama said in his news conference Tuesday.
Investor confidence in the U.S. economy’s underlying fundamentals and in his administration’s response to the financial crisis has helped the greenback, Obama says.
“The reason the dollar is strong right now is because investors consider the United States the strongest economy in the world with the most stable political system in the world,” he maintains.
“You don't have to take my word for it. I think that there is a great deal of confidence that ultimately, although we are going through a rough patch, that prospects for the world economy are very, very strong.”
Earlier this week Chinese central bank Governor Zhou Xiaochuan took issue with Obama’s view, saying the dollar should be replaced as the world’s reserve currency by the International Monetary Fund’s special drawing right.
China holds hundreds of billions in U.S. dollar-denominated Treasury debt, investments that would lose value if the dollar fell and would likely prompt the Chinese to sell those assets, driving up U.S. interest rates in the process.
Obama disagrees. “I don't believe that there's a need for a [new] global currency,” he says.
The dollar has slipped in recent days after the Federal Reserve said it would buy Treasuries and the Treasury Department outlined plans to buy illiquid bank assets.
The dollar has dropped 7 percent against the euro in the last two weeks. Some say the rout has just begun.
“It's a terribly flawed currency,” investment guru Jim Rogers told Reuters.
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