IMF Slashes Growth Forecasts [ May 14th, 2009 ] Posted in » Forex News

Forex news continues to be predictably grim. Last month, the International Monetary Fund (IMF) slashed its growth forecast for every major country and predicted that the global economy will contract 1.3% this year, although the IMF did issue a sliver of hope that it would grow 1.9% next year, depending on the state of the financial system. Until then, however, forex trading is expected to remain volatile.

The U.S., which the IMF said is at the epicenter of the crisis, is expected to contract 2.8% this year, and recovery is unlikely until 2010. However, the U.S. recession may ease before the Eurozone recession due to earlier distribution of stimulus funds and the U.S. government’s aggressive actions to restore liquidity. In comparison, the Eurozone economy is expected to contract 4.2% this year and another 0.4% next year, signaling the need for EU countries to coordinate a comprehensive, collective response to the crisis.

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Analyst: “The Dollar is No Longer as Good as Gold”

Earlier this month, an AP article painted a bleak picture of the dollar’s current and future status as the world’s reserve currency and the most powerful currency in online forex. The proliferation of stimulus efforts has left analysts worried about both the U.S.’ ability to control its ballooning deficits and the greenback’s position in relation to those debts. Both Russian and Chinese officials have intimated that it might be time to start evaluating alternatives for the world’s forex reserves in case the dollar implodes.
Peter Schiff, president of the Euro Pacific Capital brokerage, told the AP, “I think the dollar will continue to drop. Based on what we’ve done, it could lose 70% to 80% of its value over the next five to 10 years. The dollar is no longer as good as gold. It’s no longer better than any other currency.”

Others disagree, saying that the Obama administration’s efforts have helped the dollar maintain relative strength against the euro, yen, pound, and other currencies. Or, at the very least, the dollar’s proponents contend, the dollar isn’t in danger of slipping anytime soon. "I liken the dollar to an aging boxing champ in terms of being a reserve currency," said executive director of The Economic Outlook Group Bernard Baumohl.  He told the AP, "It survives because there’s no other contender out there."

April 29th, 2009 | 2 Comments

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