h
/ 89.171.91.* / 2007-09-22 06:17
But maybe the biggest beneficiaries of a weakened dollar are U.S. exporters, as domestically produced goods become cheap in the eyes of foreign buyers.
David Kelly, managing director and economic adviser for Putnam Investments, notes that higher exports will help trim the United States' bloated trade and current account deficits.
"[The dollar] will continue to fall until we see a sea change in the U.S. trade deficit," he said.
How far will the dollar fall?
Currency experts, such as Ezechiel Copic, a senior currency analyst at IDEAGlobal in New York, are betting the dollar will hit $1.45 by year's end.
But a continued drop in the dollar's value against the euro could prompt European politicians and economic officials to demand that the European Central Bank cut its own interest rates to keep the euro in check.
"I think anywhere between $1.45 and $1.50 we will hear some serious pain," said Copic.
In the United States, a battered dollar is certain to contribute to inflation and squeeze Americans' pocketbooks.
A weaker U.S. currency, besides pushing up the price of foreign goods, also drives up the price of commodities priced in dollars, such as oil, which has a big impact on consumer spending by Americans.
But a weaker dollar will also hurt overseas businesses. Companies that export goods to the United States may not only face weakened demand, they could also suffer tighter profit margins.
Commonfund's Strauss believes that many foreign firms have probably already accounted for the dollar's recent decline in their financial forecasts. Still, he warned, many of them will struggle - threatening economies overseas.
"That might be more important than our inflationary effect," he said.