U.S. Dollar Shrinks - Top Three Reasons

As we watch the recent developments in the foreign exchange (FOREX) market, you will notice in particular, that the Canadian dollar continues to trounce the U.S. dollar. For most of the last thirty years, the reverse was true. Less than 10 years since its birth, the Euro also has overtaken the U.S. dollar in unit value. Let us explore the three major reasons underlying these facts.High Oil Prices A very cursory glimpse at the crude oil prices will reveal that prices are at record levels. Recently, a high of $97 per barrel was reached. Although it is an oil producer, the United States remains a net importer of crude oil. Traditionally, we have bought more oil from abroad than we have produced domestically and exported. For its part, Canada has become a net exporter of oil. This is made possible largely due to very large reserves contained in its oil sands. The rise in the prices of oil has boosted the value of the Canadian dollar as countries from around the world fuel the demand for the critical commodity. As the largest trading partner of the U.S., Canada has seen a lot of U.S. dollars flow into its economy through the oil industry.Gradual Shift to PetroEuros Historically, countries from around the world have used the U.S. dollar as the international reserve currency. This practice gave rise to the term "petrodollars", i.e. the U.S. dollar was the currency used to pay for oil imported by various countries. As the Euro proliferated during the past decade, governments and companies started to view it as a viable option for doing international business. Consequently, a gradual shift away from the dollar and toward the Euro has begun as a reserve alternative regarding international trade. The fact that the Euro is supported by a number of European countries also speaks to its perceived stability.Iraq War The total economic impact of the Iraq war is difficult at best, if not impossible, to accurate determine. According to author Robert Looney writing for Strategic Insights, Volume 2, Issue 11 (November 3, 2003), some theorize that the United States invaded Iraq because in 2000 Saddam Hussein had switched from dollars to the euro as the medium of exchange for purchasing Iraqi oil. Whatever the case, the effect the war has had on the perception of the United States as a rational and cooperative republic has come under serious scrutiny. Some of the staunchest allies of the U.S. refused to go to war with it or approve the U.S going to war with Iraq at all. The war has siphoned monies which, arguably, could have gone into more productive sectors of the U.S. economy. One of the eventual effects is that the U.S. dollar suffers the tremors arising out of the growing concern about which direction America is headed and how its political climate impacts the value of the dollar. For FOREX traders, this means looking for opportunities to capitalize on the largely one-way trend.Sandy Robinson, J.D., Copyright 2007If you are ready to change your future by stepping into the exciting world of trading FOREX, go to http://www.winningtradersassociation.com for more information. Author Sandy Robinson, J.D. is part of the Winning Traders Association, an educational organization founded by John Beiler, President. The organization consists of a network of committed trainers and motivated traders willing to provide support to those interested in trading foreign exchange. Many of the members work from home.Napa Automotive PartsEasy Cash Advance WisconsinConsolidation Loans Debt Loan

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