With the pound and euro continuing to strengthen relative to the dollar, your hard earned cash can now stretch very far indeed. If you wanted $60,000 in late May it would have cost you around €45,000/£40,000. Now it will cost €40,000/£36,500. That’s quite a difference.

So a weak dollar is great news for those seeking to purchase US property from abroad, but as many of our readers working in the financial industry will know, the prospect of a consistently weak dollar is of real concern to finance ministers, company bosses and traders around the world.

If one were to listen to the US authorities the message is pretty much the same every week, “it is very important for the US to have a strong dollar“. They haven’t been taking much action to backup that message though.

As any first year economics student will tell you, a weak currency boosts exports and restricts demand for imports, thus improving the economy and lowering the trade deficit. This might suit the US in the short term but it certainly doesn’t suit the EU or Asia, both of whom want to sell their goods and services to the US as cheaply as possible to kick start their own economies.

The other big worry revolves around the strategies big countries like the US, Britain, Germany, Japan and China will pursue to withdraw the massive assistance they’ve been providing to prop up their economies. That’s a story for another blog though.

Kind Regards

Colin Murphy

Torcana.com

Tags: Currency, profitable strategies, Torcana

This entry was posted on Monday, October 26th, 2009 at 1:23 pm and is filed under General Opinion. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.