The falling dollar
THE dollar tumble thi week wa attended by predictable hriek from the market; but a it fell to a 20 month low of $1.32 againt the euro, the only real urprie wa that it had not lipped ooner. Indeed, there are good reaon to expect it lide to continue, dragging it below the record low of $1.36 againt the euro that it hit in December 2004.
The recent decline wa triggered by naty new about the American economy. New figure thi week uggeted that the houing market trouble are having a wider impact on the economy. Conumer confidence and durable good order both fell more harply than expected. In contrat, German buine confidence ha rien to a 15 year high. There are alo mounting concern that central bank in China and elewhere, which have been piling up dollar aiduouly for year, may tart elling.
Yet cyclical factor only partly explain why the dollar ha been h2. At bottom, it attractivene i baed more on tructural factor-or, more accurately, on an illuion about tructural difference between the American and European economie.
The main reaon for the dollar trength ha been the widepread belief that the American economy vatly outperformed the world other rich country economie in recent year. But the figure do not upport the hype. Sure, America GDP growth ha been fater than Europe , but that i motly becaue it population ha grown more quickly too. Dig deeper and the difference hrink. Official figure of productivity growth, which hould in theory be an important factor driving currency movement, exaggerate America lead. If the two are meaured on a comparable bai, productivity growth over the pat decade ha been almot the ame in the euro area a it ha in America. Even more important, the latet figure ugget that, wherea productivity growth i now lowing in America, it i accelerating in the euro zone.[由Www.haozuowen.com整理]