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FT: Down But Not Out

Author: Krishna Guha
October 18, 2009


Though fears of an impending currency crisis may be overstated, writes Krishna Guha, complacency could fuel an accelerated decline of the dollar in the near term.

When finance ministers and central bank governors met in Istanbul this month amid angst about the declining dollar, Tim Geithner was anxious to impart a basic message. "We recognise the dollar's important role in the system conveys special burdens and responsibilities on the US," the Treasury secretary told journalists. "And we're going to do everything necessary to sustain confidence."

Since then the greenback has continued to slide - falling to a 14-month low last week - provoking cries of pain from policymakers in the eurozone and elsewhere. Jean-Claude Trichet, president of the European Central Bank, said last Thursday that it was "extremely important" that the US follow policies that support a strong dollar - saying excessive currency volatility was an "enemy".

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