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Ärende: The saga of the US Dollar
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Dollar's clout sinks worldwide
By ALAN CLENDENNING, AP Business Writer 36 minutes ago
 
SAO PAULO, Brazil - Antique store owners in lower Manhattan, ticket vendors at
India's Taj Mahal and Brazilian business executives heading to China all have
one thing in common these days: They don't want U.S. dollars.
 
Hit by a free fall with no end in sight, the once mighty U.S. dollar is no
longer just crashing on currency markets and making life more expensive for
American tourists and business people abroad; its clout is evaporating
worldwide as foreign businesses and individuals turn to other currencies.
 
Experts say the bleak U.S. economic forecast means it will take years for the
greenback to recover its value and prestige. Negative dollar sentiment is
growing in nations where the dollar was historically accepted as equal or
better than local currency — and dollar aversion is even extending to some
quarters in the United States.
 
At the Taj Mahal, dollars were always legal tender, alongside rupees, for entry
into the palace. But because of the falling value of the dollar, the government
implemented a rupees-only policy a month ago. Indian merchants catering to
tourists have also turned bearish on the dollar.
 
"Gone are the days when we used to run after dollars, holding onto them for
rainy days," said Vijay Narain, a tour operator in the city of Agra where the
Taj Mahal is located. "Now we prefer the euro. It gives us more riches."
 
In Bolivia, billboards feature George Washington's image on a $1 bill alongside
a bright pink 500 euro note, encouraging savers to turn to the euro to tuck
away money earned abroad or sent home in remittances.
 
"If the dollar's going down ... save it in Euros!!!" say the signs popping up
around La Paz for Bolivia's Banco Bisa. And in neighboring Brazil, the
Confidence Cambio money-changing service was the first to start offering yuan
so travelers to China no longer have to change the money into dollars first.
 
The service is already a hit because Brazil does big business with China, and
lots of Brazilians are heading to the Olympics this summer.
 
"Now we tell people not to take dollars when they go abroad, it's better to
change it directly to the local currency," said Fabio Agostinho, one of the
firm's managing partners. "If people leave here with dollars and go abroad,
they lose when they exchange them. It's the same thing whether they're heading
to China, Europe or even Argentina."
 
In Manhattan's Bowery district, Billy LeRoy, the owner of Billy's Antiques &
Props, prefers payment in euros so he can stockpile the currency for his annual
antique buying trip to Paris.
 
"Whip out dollars at the French flea market now, and they'll shoo you away," he
said at his store near apartment buildings where Europeans are snapping up
units because they've become dirt cheap. "Before it was like the second coming
of Christ, but now they don't want it or if they do take dollars, they're going
to take their pound of flesh."
 
The dollar has steadily eroded in value against the euro and other currencies
since 2002 as U.S. budget and trade deficits ballooned, but fears of an
American recession and credit crisis have sent the dollar to stunning lows amid
predictions the slump will continue for a long time.
 
The euro traded for a record $1.5625 before declining to $1.5586 Thursday while
the dollar dropped below 100 Japanese yen for the first time since November
1995. It traded as low as 99.75 yen before recovering some ground to 101.68
yen. The dollar also recently hit a 10-year low against the Chilean peso, and
fell to its lowest level against Brazil's real since the nation floated its
currency in 1999.
 
While low dollar cycles have come and gone for decades, experts caution that
it's now much more difficult to predict when this one will end because the euro
didn't exist as competition for the dollar before.
 
During previous U.S. economic downturns, big foreign funds typically snapped up
U.S. treasuries, helping to shore up the dollar to a certain degree. But the
euro and currencies from other nations are now seen as legitimate options, and
interest rates are higher outside the United States — meaning the funds can get
better returns on investments elsewhere.
 
"You have the U.S. still holding this trade deficit, but now you have the
possibility of a U.S. led recession, and you have a weakening currency. So it's
a very dark outlook for the dollar," said Gareth Sylvester, senior currency
strategist with the British firm HIFX Inc., which executed $40 billion in
currency trades last year.
 
Nations that were once seen as incredibly risky for investments — such as
Brazil — are now seen as good long-term bets. And countries such as China and
Russia, with burgeoning coffers of money to invest abroad, are thought to be
shifting some of their reserves or diversifying fresh income to destinations
and currencies outside the United States.
 
It used to be important for most countries "to accumulate dollars as a
precautionary element against rainy days, but the accumulation of reserves has
become so large in most emerging market countries that the balance is way
beyond what's needed for precautionary reasons," said Eliot Kalter, a fellow at
Tufts University's Fletcher School of Law and Diplomacy and a former
International Monetary Fund official.
 
While most experts believe the dollar will eventually regain strength, no one
is willing to predict when that will happen. "I think the factors that are
affecting the weakness of the dollar will be reversed, but no time soon,"
Kalter said.
 
The problem right now, is that "people just don't want to be holding U.S
dollars and U.S.-based equities," Sylvester added. "If you are an investor with
a million dollars to invest, you look for the highest yield — you're looking at
South Africa, Australia, New Zealand."
 
And it's not only the big time investors that are looking for other options.  
In Peru, where savings in U.S. dollars were long a popular hedge against
inflation, many citizens are closing dollar accounts in favor of Peruvian
soles. At the same time, businesses like supermarkets, movie theaters and cable
TV companies that used to accept dollars are now demanding soles.
Edwin Figueroa, a 29-year-old systems engineer, switched his checking account
from dollars to soles seven months ago as the dollar's decline started worrying
him. He doesn't think he'll be going back anytime soon.
The Peruvian sol "is stable now," he said. "And maybe in a year,
the dollar will even go lower."

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