Paper wisdom>In Thailand, hotels are quoting room rates in dollars and foreign airlines want to do the same with air fares. In
Singapore, businesses are turning local bank accounts into dollars.
And in Russia, even maids and mechanics hoard dollars as informal
savings accounts.
The turbulence in Asia that has rocked financial markets around the
globe has boosted the dollar, giving it more prestige than it has had
in many years and making it the currency of choice.
"The dollar is king,'' said Allen Sinai, chief global economist at
Primark Decision Economics.
That's a big change from the late 1980s and early 1990s when the
Japanese yen and German mark towered over the dollar. Americans
traveling overseas found their dollars bought little, and imported
goods were often priced out of reach. It was less than three years
ago that the dollar fell to a post-World War II low against the
Japanese yen.
Now, with the U.S. economy winding up its seventh year of
expansion, inflation running at a slow pace and unemployment at a
24-year low, the buck is riding high.
The high-flying dollar is welcome news for American consumers, at
home or abroad.
The buoyant buck makes goods imported to this country -
whether clothing and cheese or cameras and cars - much less
expensive. With a wave of cheaper imports expected from Asia in
the coming months, inflation is expected to stay calm.
With inflationary pressures subsiding, interest rates should remain
low, a bonus for consumers interested in buying houses or
refinancing mortgages.
For Americans traveling overseas, their dollars should go farther,
with prices for hotel rooms, food and souvenirs less, when
translated into dollars, than even a few years ago.
"There are no negatives for consumers with a strong dollar,'' Sinai
said.
Overseas, the dollar's resurgence has been keenly felt in Asia.
Currencies throughout the region have been hammered in the
financial crisis that began last summer. The Thai baht, the
Malaysian ringgit and Korean won have lost about half their value
against the dollar since July. The Indonesian rupiah is worth some
80 percent less.
The Japanese yen also has skidded, reflecting worries about the
nation's weak economy. In early January, it took nearly 134 yen to
buy a dollar, the most since April 1992. In contrast, the dollar
slipped below 80 yen in April 1995, leading to an international effort
to revive the U.S. currency.
In recent days, the yen and other currencies have gained back some
of their lost ground against the dollar because of market jitters over
the White House sex scandal and worries over its political and
economic impact.
In Europe, the German mark has lost ground, partly because of
uncertainty over Europe's planned single currency. The euro,
debuting next year, will replace the mark as Europe's premier
money. The dollar surged to an 8 1/2-year high against the mark in
early August.
As its value has rocketed, the dollar has become more desirable to
foreign governments, businesses and consumers.
Gold, which has traditionally been held as a hedge against inflation,
has lost much of its luster. Central banks recently have been
dumping their gold bullion because of its declining value.
"We've clearly moved to a dollar standard around the world,'' said
Jeremy Siegel, professor of finance of the University of
Pennsylvania's Wharton School of Business.
In fact, more dollars circulate outside the United States than inside.
The Federal Reserve estimated in 1996 that about 60 percent of all
dollars were overseas. Now, it is estimated that as much as
three-quarters of new notes printed go abroad. Panama and Liberia
use the dollar as their official currency.
Russia is thought to have more dollars in circulation than any
country other than the United States.
Dollars - preferably $100 notes - are widely held in Moscow,
informally serving as a dual currency. The government, worried
about the dollarization of the economy, last year decreed that most
businesses must accept payment only in the national currency, the
ruble. Still, dollars abound.
The Malaysian government, too, wants to discourage the dollar's
use after reports that some traders were invoicing bills in dollars.
The central bank now says all local payments must be made in
ringgit. Dollars can be used to pay foreign loans or for overseas
education or employment.
In the Philippines, police recently shut down dozens of money
changers, accusing them of hoarding dollars and causing the local
currency, the peso, to slide. |
