THE FLUCTUATIONS OF US DOLLAR & ITS EFFECTS TOWARDS THE WORLD ECONOMY

NAME MATRIC NO.

LIM SHI YING (LEADER) BG 0911 0373

LEE KIT YI BG 0911 0329

LIM WOON SIN BG 0911 0374

SHALANI D/O NADARAJAH BG 0911 0278

TAI SIANG YING BG 0911 0111

TANG HWEE PING BG 0911 0093

INTRODUCTION

US DOLLAR

significant dominant currency

roughly two thirds of all official exchange reserves

denominated in more than four-fifths of all foreign exchange transactions

lead the purchasing power of US consumers

Mid -2009 , began to turn down again

OBJECTIVES

To investigate the factors that influence the US dollar.

To determine the impact of the US dollar fluctuation towards the world economy, and the countries that have been affected the most.

To evaluate the policy that has been implementing to the fluctuations of US dollar.

FACTORS INFLUENCE U.S. DOLLAR

Trade deficits downward pressure dollar value

Housing bubble speculation in house value

Size and liquidity of U.S asset markets the foreign central bank increase foreign reserves

Interest rate Treasuries declines, the investment is less attractive

CONTINUED…

Currency peg weaker currency would peg itself

Market psychology expected the future path of dollar

Inflation purchasing power of currency

Gold fundamentals dollar decrease, gold increase.

THE EFFECT OF US DOLLAR FLUCTUATIONS TOWARDS THE WORLD ECONOMY

Gradually depreciation - rebalancing of the US current account deficit- strengthen domestic demand

- broaden world economies Sharpen depreciation - Weak domestic demand

- decline in export

CONTINUED…

- lower growth in the countries who rely on export to US.

- Lead to rising inflation Dollar appreciated - increase the purchasing power

- increase import demand, stimulate exporter countries economy growth.

THE COUNTRIES HAVE BEEN AFFECTED THE MOST

The Economy of the Middle East

The economic conditions in the United States

The impact exchange rate is seen on oil demand

and supply.

Japan and China.

CONTINUED….

affects the output of the East Asian

economies in both trade and foreign direct

investment.

Affects India’s economy.

The value of total U.S trade with Africa had

increased.

POLICY TO RESPONSE

1) Government direct intervention in the Foreign

Exchange

- Treasury buying or selling foreign exchange

2) Monetary policy

- changes of interest rates

CONTINUED….

3) Fiscal policy & Federal debt

- Government’s spending and taxing

4) Lower foreign trade barriers

-boost the demand for U.S. goods and

services

CONCLUSION

depreciation of U.S dollar value has great influences

World economic effect

Policy response

Eurodollar