Dollar Breaks 1.40 Level Against Euro

As a result of the Fed's rate cut, the dollar fell to a new record low against the euro, so that a euro now costs more than $1.40 for the first time ever. It also fell to 6.57 Swedish kronor, the lowest level against the Swedish krona since the 1992 devaluation of the krona.

Another key psychological barrier likely to be broken soon is the 1:1 parity level against the Canadian dollar. The Canadian dollar at US$0.9913, the highest in more than 30 years, and it seems likely that soon the Canadian dollar will have the same or slightly higher value than its U.S. counterpart. As late as in early April, a Canadian dollar cost only 87 U.S. cents, but have risen 14% in less than 6 months. Given the fact that the United States is still Canada's dominant trading partner this is going to be disliked by many Canadian exporters -and import-competing domestic firms- and these dramatic fluctuations is of course what leads some Canadians to call for a North American Monetary Union.

However, despite the damage to exports that these sharp currency movements create, Canadians might still benefit from having their own currency to the extent it allows them to pursue less inflationary monetary policies than the Fed would have imposed on them.

The U.S. dollar also fell below the key 40 barrier against the Indian rupee today. It will probably fall below 7.50 against the Chinese yuan soon. That seems in a way even more certain than the continued decline against other currencies although the timing is less certain as Chinese authorities have increased the irregularity of the yuan's appreciation against the U.S. dollar.

Meanwhile, the one honest currency of the world, gold, continues to soar to new post-1980 highs against the U.S. dollar.

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