It is still fashionable in official circles to blame speculators for weak currencies.
To watch the news these days is to hear about dollar weakness, but in truth the dollar is merely the weakest of a world of weak currencies.
While the economic establishment still seems to think that investors like weak currencies so they can buy on the cheap, experience shows clearly that global investors are heavily growth- and momentum-oriented.
The paradoxical fact is that weak currencies (like the Italian lira, in the pre-euro era, and the Turkish lira) often outperform stronger currencies (like the deutsche mark and the U.S. dollar).
Back in September 1985, the top treasury officials of the G5 countries met at New York's Plaza Hotel to realign the major currencies amid worries, particularly at home, that weak foreign currencies were negatively impacting the ability of U.S. companies to export.
The costs of this would be astounding, and the imbalances between the weak and strong currencies would foster a new crisis.
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In some countries, such as India and Indonesia, currencies remain weak because of trade deficits.
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Governments usually manipulate exchange rates to make their currencies artificially weak, not strong.
The dollar has been weak against other major currencies over the past few years, but the peso is one that hasn't strengthened against it.
Foreign buyers had another advantage until recently while the dollar was weak and their local currencies were strong giving them an added discount compared to local buyers.
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Given the low interest rate environment in the U.S., the U.S. dollar has been weak against other foreign currencies in recent years, which, in addition to the other factors previously discussed, has helped fuel a rise in the price of gold since the great market meltdown of 2008.
However, it is quite natural for weak economies to experience depreciating currencies and for booming economies to see rising ones.
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As shown in the second table below, the ten largest of these firms generated 42% of their 2003 revenue outside the U.S. Aided by a weak dollar (the same amount of sales in foreign currencies now gets translated into more U.S. dollars), foreign sales rose 17% in 2003, versus 7% for domestic revenue.
If the market views the deal as long-term weak, then the dollar will continue its downward trend against all currencies and commodities, which is problematic for China.
Profit fell 53 percent from 2010, which Huawei blamed on weak global demand and the strength of China's yuan against foreign currencies.
They are saying that a weak dollar is forcing Central Banks around the world to turn to other currencies and hard assets because they are losing value on their dollar based assets.
The impact of a weak yen might not be significant in the upcoming earnings since the companies generally have their currencies hedged for the next few months.
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In addition, the weak yen reduces the competitive advantage that the Asian devaluations would otherwise have given the tigers' currencies.
And the weak-currency countries would be under pressure to raise interest rates in order to support their currencies--even though higher interest rates are about the last thing most of Europe's sclerotic economies need.
Put simply, the foreign currencies that have exhibited relative strength have only been strong insofar as the dollar has been very weak.
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