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The change in the value of the dollar is determined by a number of key issues and economic factors. These can be brought about by both internal and international events.

TRADE AND ECONOMY

Dollar value is strengthened when a country's economy is performing well. However, in terms of the internal economy, this has to be a balancing act to ensure that it does not perform too strongly, as this can lead to inflationary pressures, which can also affect the dollar. If the inflation levels are left unchecked, it will cause a devaluation of the dollar, as more money has to be printed and released into circulation. In this respect, the simple rules of supply and demand apply, namely the greater the level of supply the lower the value of the individual unit, in this case the dollar.

The value of the dollar is also affected by the trade position that the US has with the rest of the world. Before George Bush Jnr came to power, the US was running a trade surplus. This denoted a healthy position and thus encouraged investor to put their money into dollar currency. However, during the Bush era the US trade with the rest of the world has seen one of the worst periods of deficits in the country's history, thus discouraging the money market investor.

INTERNATIONAL CURRENCY

The other aspect of trade and economy is that the US does not perform in isolation. Every country has the same issues to address and they are all competing for the attention of the financial markets. Thus, the better performing nations are likely to be the winners and see their currency values increase. At present, and likely to remain so for the near future, this puts the US performance way below the emerging nations such as China and India. The strength of these countries currencies is therefore achieved at the expense of the weakness in the dollar.

Money is like any other product, in the international scene it is brought and sold and the currency that is deemed the best value will be the one that rises, leaving the lesser-valued currency effectively falling to a lower price.

INTEREST RATES

Interest rates are another factor that might affect the value of the dollar. However, interest rates are a bit like a double-edged sword. High rates attract currency investor as they are getting a better return on their money but on the other hand, they increase the cost of borrowing, which would have an adverse effect on the nations economy. Lower interest rates can work in exactly the opposite way of course. The difficulty again

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