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The dollar continues to fall. Thankfully the all has been orderly -- meaning it has occurred a little bit at a time rather than all at once. This gradual decline has made it much easier to accept and deal with. However, the underlying trend is clear: the US' current economic policies are hurting the dollar.
First - here's the daily dollar chart. Notice it is still in a decline. The shorter term simple moving averages are below the longer term moving averages which will pull the longer averages lower.
From the weekly perspective, the dollar has been in a downtrend for a little over a year, making the trend firmly entrenched in the markets.
Now we have two new developments -- more countries getting away from dollars.
First there is Russia:
The Central Bank of Russia says the amount of U.S. dollars held by individual citizens of this country is rapidly declining. The bank says Russians are also moving increasing sums abroad. Moscow correspondent Peter Fedynsky follows the money trail and reports that Russians are gaining confidence in their own economy.
New figures released by the Russian Central Bank indicate the amount of U.S. dollars held by private Russian citizens has dropped since 2002 from $35 billion to less than $12 billion as of July 1.
That's a decrease of 65% over 5 years -- a very sizable decrease.
Then there is Iran:
Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran's central bank said it is reducing holdings of the U.S. dollar.
Iran wants yen-based transactions ``for any/all of your forthcoming Iranian crude oil liftings,'' according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. The request is for all shipments ``effective immediately,'' according to the letter, dated July 10 and obtained by Bloomberg News.
This is a potentially powerful shift in oil policy. Oil is denominated in dollars. If one major oil country moves away from dollars, the potential exists for others to move away as well.
Why is this happening?
1.) The US is not that popular in the world right now.
2.) The US economy is growing slower than the rest of the world. While this will change within the next few years, it's not the only factor.
3.) The US is running a mammoth trade deficit. While it has leveled off over the last 6-9 months, it's not going away anytime soon.
4.) There are already a ton of dollars and dollar denominated assets floating aroung the world.
5.) The euro has become a viable reserve currency, competing with the dollar.