The U.S. dollar hit record lows today due to concerns that China might shift its foreign exchange holdings elsewhere.
I’d been concerned before when I first heard that the Canadian dollar was ahead of our own, but today, The Guardian reported that the American dollar had reached a 26-year low against the British pound:
By 10:30 a.m., one pound was worth $2.1053. The dollar, which has been weakening for several weeks, also hit a new all-time low against the euro of $1.4703.
Analysts said today’s falls had been sparked by comments made by Cheng Siwei, vice chairman of China’s National People’s Congress. He told a Beijing conference on Tuesday that China would “favour stronger currencies over weaker ones, and readjust accordingly”.
A vice director of China’s central bank, Xu Jian, was also quoted as telling the conference that the dollar was “losing its status as the world currency”.
As China’s investments and economy continue to outperform, the world seems to be watching its every move, so this certainly bears bad tidings for the U.S. And China’s not the only country with fears regarding the dollar’s stability as the sub-prime situation continues to unravel our economy.
Saudi Arabia, South Korea, Venezuela, Sudan, Iran and Russia are all looking to shift their investments away from U.S. currency. The Bank of Korea is expected to sell off $1 billion in U.S. bonds in the near term, while Iran recently requested that Japanese shipments be paid in yen instead. Russia and Sudan are openly discussing their own plans to convert their dollar holdings to euros.
Even supermodel Gisele BÃ¼ndchen has requested payment for her modeling work in euros rather than U.S. dollars:
“Contracts starting now are more attractive in euros, because we don’t know what will happen to the dollar,” Patricia BÃ¼ndchen, the model’s twin sister and manager in Brazil, said in September from Sao Paulo. She declined to discuss details of the arrangements last week.
Beneath her primped and polished exterior, BÃ¼ndchen just might be a savvy investor. After all, beyond being one of the world’s highest-paid supermodels, earning $33 million in 2006, she does have her own index at Stockpickr.com.
Are your investments dollar-dependent, or have you diversified to include international holdings? Have recent events changed your investment strategy?
7 Countries Considering Abandoning the US Dollar (and what it means) [CurrencyTrading.net]
Image Credit: Wendy Skeleton
Updated December 20, 2011 and originally published November 7, 2007.