Today the American Dollar was met with both encouraging and potentially disheartening news. First, the Dollar rose against the Australian Dollar, Swiss Franc and Yen as China announced that the USD will continue to remain the world’s leading trade currency. In addition, Beijing said it will not make changes to its foreign-exchange reserves. This comes after months of speculation that China could be seeking to look for a new reserve currency, an idea that has been vociferously floated by Russia and other BRIC nations to a lesser degree. (This is a reversal for Beijing, which repeated a call for a new international reserve currency last week.) Financial analysts meanwhile are mostly in the USD’s corner. Deutsche Bank, for example, predicts the Dollar to gain by 17% against the Euro by the end of the year – its largest increase since 1981. In any case, whether China will push for the Dollar or encourage a new international currency in the long run, the USD’s rise and fall on Chinese public assessments is further credit to Beijing’s stayed economic clout.
Despite today’s vote of confidence for the Dollar by Beijing, some interesting news surfaced concerning Brazil-India bilateral trade. Brazil announced that it is considering using its own currency when trading with India in lieu of the USD. This might be a judicious decision, as the Wall Street Journal points out Brazilian companies have lost hundreds of millions of dollars over the past 2 years due to the weakness of the dollar.
