Chief Prognosticator

How Low Can the Greenback Go?

The falling value of the U.S. dollar relative to the Euro, British Pound and Canadian dollar seems to have no end in site. I had to experience this first hand between 2005 and 2007 when I lived in Europe. I was still being paid salary in U.S. dollars and saw the currency fall from $1.22 to the Euro all the way to $1.40! That hurt!

But now the U.S. dollar has hit an all-time low! According to the Financial Times online, the Euro hit $1.51 in value today, shortly after U.S. Federal Reserve Bank Chief Bernanke testified the following to Congress:

“[The Fed] will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks.”

What does that mean? Interest rates are headed lower for the U.S. economy even as inflation risks grow. This means fewer and fewer foreign investors will want U.S. Treasuries (since they pay less interest) and therefore devalue the dollar even more.