Sunday, August 21, 2011
Demise of the U.S. Dollar?
This analysis is written by Dr. Bento Lobo, First Tennessee Bank Distinguished Professor of Finance, with research support from Matthew Crawford, Justin Dorris, Brittany Justice and Kristin Miller, all students in his International Finance class at UT Chattanooga this past spring semester.
The dollar is a leading transaction currency in the foreign exchange markets and a key invoicing currency in international trade. About 85 percent of foreign exchange transactions world-wide are trades of other currencies for dollars, even among trades among companies outside of the United States.
“When a South Korean wine wholesaler wants to import Chilean cabernet, the Korean importer buys U.S. dollars, not pesos, with which to pay the Chilean exporter,” University of California at Berkeley Economist Barry Eichengreen recently wrote in the Wall Street Journal. “Indeed, the dollar is virtually the exclusive vehicle for foreign exchange transactions between Chile and Korea, despite the fact that less than 20 percent of the merchandise trade of both countries is with the U.S.”
According to the U.S. Treasury Department, about 65 percent of all U.S. banknotes circulate outside the country: roughly 75 percent of hundred-dollar notes, 55 percent of fifty-dollar notes, and 60 percent of twenty-dollar notes are held abroad. Dollar banknotes used abroad provide some foreign households and businesses with a more stable store of value, and a sounder transaction currency, especially during periods of turbulence overseas .. continues ...
Read Full Article
http://timesfreepress.com/news/2011/aug/21/demise-us-dollar/
Demise of the U.S. Dollar?
This analysis is written by Dr. Bento Lobo, First Tennessee Bank Distinguished Professor of Finance, with research support from Matthew Crawford, Justin Dorris, Brittany Justice and Kristin Miller, all students in his International Finance class at UT Chattanooga this past spring semester.
The dollar is a leading transaction currency in the foreign exchange markets and a key invoicing currency in international trade. About 85 percent of foreign exchange transactions world-wide are trades of other currencies for dollars, even among trades among companies outside of the United States.
“When a South Korean wine wholesaler wants to import Chilean cabernet, the Korean importer buys U.S. dollars, not pesos, with which to pay the Chilean exporter,” University of California at Berkeley Economist Barry Eichengreen recently wrote in the Wall Street Journal. “Indeed, the dollar is virtually the exclusive vehicle for foreign exchange transactions between Chile and Korea, despite the fact that less than 20 percent of the merchandise trade of both countries is with the U.S.”
According to the U.S. Treasury Department, about 65 percent of all U.S. banknotes circulate outside the country: roughly 75 percent of hundred-dollar notes, 55 percent of fifty-dollar notes, and 60 percent of twenty-dollar notes are held abroad. Dollar banknotes used abroad provide some foreign households and businesses with a more stable store of value, and a sounder transaction currency, especially during periods of turbulence overseas .. continues ...
Read Full Article
http://timesfreepress.com/news/2011/aug/21/demise-us-dollar/
