Even in South America workers prefer euros, other local currencies
The Associated Press updated 4:44 p.m. ET March 13, 2008
The Associated Press updated 4:44 p.m. ET March 13, 2008
SAO PAULO, Brazil - Antique store owners in lower Manhattan, ticket vendors at India's Taj Mahal and Brazilian business executives heading to China all have one thing in common these days: They don't want U.S. dollars.
Hit by a free fall with no end in sight, the once-mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad: Its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.
Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.
Negative dollar sentiment is growing in nations where the dollar was historically accepted as equal or better than local currency — and dollar aversion is even extending to some quarters in the United States.
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At the Taj Mahal, dollars were always legal tender, alongside rupees, for entry into the palace. But because of the falling value of the dollar, the government implemented a rupees-only policy a month ago. Indian merchants catering to tourists have also turned bearish on the dollar.
At the Taj Mahal, dollars were always legal tender, alongside rupees, for entry into the palace. But because of the falling value of the dollar, the government implemented a rupees-only policy a month ago. Indian merchants catering to tourists have also turned bearish on the dollar.
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"Gone are the days when we used to run after dollars, holding onto them for rainy days," said Vijay Narain, a tour operator in the city of Agra where the Taj Mahal is located. "Now we prefer the euro. It gives us more riches."
"Gone are the days when we used to run after dollars, holding onto them for rainy days," said Vijay Narain, a tour operator in the city of Agra where the Taj Mahal is located. "Now we prefer the euro. It gives us more riches."
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In Bolivia, billboards feature George Washington's image on a $1 bill alongside a bright pink 500 euro note, encouraging savers to turn to the euro to tuck away money earned abroad or sent home in remittances.
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"If the dollar falls ... save in euros!!!" say the signs popping up around La Paz for Bolivia's Banco Bisa.
"If the dollar falls ... save in euros!!!" say the signs popping up around La Paz for Bolivia's Banco Bisa.
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And in neighboring Brazil, the Confidence Cambio money-changing service was the first to start offering yuan so travelers to China no longer have to change the money into dollars first. The service is already a hit because Brazil does big business with China, and lots of Brazilians are heading to the Olympics this summer.
And in neighboring Brazil, the Confidence Cambio money-changing service was the first to start offering yuan so travelers to China no longer have to change the money into dollars first. The service is already a hit because Brazil does big business with China, and lots of Brazilians are heading to the Olympics this summer.
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"Now we tell people not to take dollars when they go abroad, it's better to change it directly to the local currency," said Fabio Agostinho, one of the firm's managing partners. "If people leave here with dollars and go abroad, they lose when they exchange them. It's the same thing whether they're heading to China, Europe or even Argentina."
"Now we tell people not to take dollars when they go abroad, it's better to change it directly to the local currency," said Fabio Agostinho, one of the firm's managing partners. "If people leave here with dollars and go abroad, they lose when they exchange them. It's the same thing whether they're heading to China, Europe or even Argentina."
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In Manhattan's Bowery district, Billy LeRoy, the owner of Billy's Antiques & Props, prefers payment in euros so he can stockpile the currency for his annual antique buying trip to Paris.
In Manhattan's Bowery district, Billy LeRoy, the owner of Billy's Antiques & Props, prefers payment in euros so he can stockpile the currency for his annual antique buying trip to Paris.
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"Whip out dollars at the French flea market now, and they'll shoo you away," he said at his store near apartment buildings where Europeans are snapping up units because they've become dirt cheap. "Before it was like the second coming of Christ, but now they don't want it or if they do take dollars, they're going to take their pound of flesh."
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The dollar has steadily eroded in value against the euro and other currencies since 2002 as U.S. budget and trade deficits ballooned, but fears of an American recession and credit crisis have sent the dollar to stunning lows amid predictions the slump will continue for a long time.
The dollar has steadily eroded in value against the euro and other currencies since 2002 as U.S. budget and trade deficits ballooned, but fears of an American recession and credit crisis have sent the dollar to stunning lows amid predictions the slump will continue for a long time.
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The dollar fell to a 12-year low against the Japanese yen Thursday, dropping below 100 yen to the dollar for the first time since November 1995. The euro rose to all time high and is currently trading above $1.55. Meanwhile gold hit a new benchmark today at $1,000 an ounce. That's a jump of nearly 20 percent just since Jan. 1.
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While dollar cycles have come and gone, experts caution that it's now much more difficult to predict when this one will end because the euro didn't exist as competition for the dollar before.
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During previous U.S. economic downturns, big foreign funds typically snapped up U.S. Treasury securities, helping to shore up the dollar to a certain degree. But the euro and currencies from other nations are now seen as legitimate options, and interest rates are higher outside the United States — meaning the funds can get better returns on investments elsewhere.
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"You have the U.S. still holding this trade deficit, but now you have the possibility of a U.S.-led recession, and you have a weakening currency. So it's a very dark outlook for the dollar," said Gareth Sylvester, senior currency strategist with the British firm HIFX Inc., which executed $40 billion in currency trades last year.
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Nations that were once seen as incredibly risky for investments — such as Brazil — are now seen as good long-term bets. And countries such as China and Russia, with burgeoning coffers of money to invest abroad, are thought to be shifting some of their reserves or diversifying fresh income to destinations and currencies outside the United States.
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It used to be important for most countries "to accumulate dollars as a precautionary element against rainy days, but the accumulation of reserves has become so large in most emerging market countries that the balance is way beyond what's needed for precautionary reasons," said Eliot Kalter, a fellow at Tufts University's Fletcher School of Law and Diplomacy and a former International Monetary Fund official.
While most experts believe the dollar will eventually regain strength, no one is willing to predict when that will happen.
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"I think the factors that are affecting the weakness of the dollar will be reversed, but no time soon," Kalter said.
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The problem right now, is that "people just don't want to be holding U.S. dollars and U.S.-based equities," Sylvester added. "If you are an investor with a million dollars to invest, you look for the highest yield — you're looking at South Africa, Australia, New Zealand."
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And it's not only the big-time investors that are looking for other options.
In Peru, where savings in U.S. dollars were long a popular hedge against inflation, many citizens are closing dollar accounts in favor of Peruvian soles.
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At the same time, businesses like supermarkets, movie theaters and cable TV companies that used to accept dollars are now demanding soles.
Edwin Figueroa, a 29-year-old systems engineer, switched his checking account from dollars to soles seven months ago as the dollar's decline started worrying him. He doesn't think he'll be going back anytime soon.
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The Peruvian sol "is stable now," he said. "And maybe in a year, the dollar will even go lower."
© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
posted by Prince and Gina Parker @ 10:44 PM,
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Zapatero claims victory in Spanish elections
MADRID, Spain (CNN) -- Moments after his challenger conceded, Prime Minister Jose Luis Rodriguez Zapatero thanked a crowd of cheering supporters for Sunday's win by his Socialists in Spain's parliamentary elections.
"The Spanish have spoken with clarity, and they have decided to open a new chapter," Zapatero said."I will govern with a firm hand and with the hand extended."
With 89 percent of the vote tallied, Zapatero's Socialists had 44 percent of the vote, followed by Mariano Rajoy's conservative Partido Popular with 40 percent. Sunday's turnout was put at 75.4 percent late in the day.
Zapatero has ruled with a plurality since 2004, when he and Rajoy first faced each other in a general election, and the prime minister faced concerns about a faltering economy going into Sunday's vote.
"The economic problems have hurt everyone. The prices have risen sharply for all of the daily needs," said Manuel Lustres, a security guard who voted for the Partido Popular.
The vote was also shadowed by the death on Friday of a former Socialist town councilman, Isaias Carrasco, who was killed in an attack in northern Spain blamed on Basque separatist group ETA.
"Isaias should be here today, living this moment and alive with his family," Zapatero said Sunday night.
The 2004 election, held in the wake of the Madrid train bombings that killed 191 people, gave Zapatero's Socialists an upset victory. Zapatero's first decision upon taking office in 2004 was to pull Spain's troops out of Iraq.
Zapatero has put Spain in the vanguard of European social policy, legalizing gay marriage and making divorces easier to obtain. Roman Catholics staged a mass demonstration in Madrid last December to blast the government policies.
posted by Prince and Gina Parker @ 9:11 AM,
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