by Leonard Konis

Created on: October 22, 2009   Last Updated: October 24, 2009

The United States Dollar exchange rate has steadily been declining against major trading partners currency countries including the Japanese Yen (10/14/09 - 89.40 Yen) and Euro Dollar (10/14/09 - 1.4941), during the past fourteen months, as of October 2009. 1 Reasons for the devaluation of the U.S. Dollar against foreign currencies: Staggering unemployment rate (U.S. A.) & budget and trade deficit concerns (

4).

Also, according to Matthew Strauss, senior currency strategist in Toronto at RBC Capital Markets, a unit of Canada's biggest bank by assets said: "the re-emergence of financial concerns places a question mark on the Fed's ability to raise interest rates." (5). When interest rates are raised at least to stabilizes the devaluation of the currency. Furthermore, comments by a top Federal Reserve official confirmed U.S. interest rates would reasonable remain low for some time. (7)

Consequence of a devaluating U.S. currency, metal prices including gold steadily increase to recent new highs (10/13/09 intra - day high $1.069.70 2) and price of crude oil climbs higher (above $78.00 - 10/16/09 3) per barrel. Metal prices tend to increase as the U.S. Dollar falls as a prelude or concern for inflation (or hedge against inflation), when imported goods become more expensive to import 8.

Since crude oil is based upon the value of the U.S. Dollar, a devaluation of the currency places upward pressure on crude oil prices, besides fundamental reasons for appreciation, including demand and lower inventory supplies (6). No doubt, a devaluating U.S. currency narrows the U.S. trade deficit but makes our foreign trading partners very unhappy: U.S. trade deficit for the month of August (2009) narrowed by $30.71 billion from $31.85 billion attributed to 0.2% increase in exports and 0.6% decrease in imports (9).

United States foreign trade partners around the world realize, as the U.S. Dollar decreases, their own currencies valuation increases, costing more to export goods. Foreign central banks, according to past history, tend to raise their interest rates fore-shadowing better or improved economic news, and thus off-setting their currencies devaluation, especially against one of their biggest trading partners around the world, the United States. 12

Sooner than later, the tide will turn and the U.S. Dollar will see the end of a sell off against currencies around the world. Number of plausible reasons will be noted appreciating U.S. Dollar currency and consequentially have

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