Tracking value of the Dollar
 

Just back from India, great trip and more on that tonight, and I now need to better understand the value of the dollar in a worldwide economy. My Indian hosts are very concerned about the value of the dollar vs. the rupee. the Indian economy is growing rapidly and so is the rupee. Indedendently, the dollar is declining. Ultimately, that means less manufacturing export from India where even now they can't touch pricing from China, Bangladesh and other developing Asian countries like Vietnam.

So, anyone here track and understand international currency valuation, dollar valuation, how it is impacted, etc.? Any web/book/magazine resources you would recommend?

Well, if they are letting it float - they are not building a false economy. And that is a good thing. Let supply and demand work and let the chips fall where they may. A very interesting economy anyway, not built on cheap manufactures. All kinds of softwear and other services. A very interesting place.

How about some stories? Any good pics? What were your impressions otherwise?

Shaun, one of the reasons I bought Porsche stock was that I heard the US Treasury Secretary state in public that the administration intended to allow the value of the dollar to fall. So I figured I needed to buy some top notch stock denominated in euros to get the double whammy of increased share value and the currency boost. It worked really well.

So the dollar devaluation is not an accident. And like most things it is both good and bad. Since our national debt is denominated in dollars, we get to pay back with deflated currency which is probably good (in the short term). We also get higher prices on imported goods - which is not necessarily a bad thing. The downside is that the dollar becomes less attractive to foreign investors and so our currency and debt look less appealing to them. Oh wait, maybe that is a good thing...sort of. Or not.

Anyway, the point is that letting the dollar float down a bit is neither absolutely good nor absolutely bad. At present it seems the administration has decided that a bit of deflation is a good thing on balance. And frankly, they may be right on this one - so long as they don't get carried away with it and let the dollar plummet.

In the meantime, I figured the statements by the Treasury Sec were a "freebee". Anytime a govt official tells you in advance which way a currency is going to go, then that is like money in the bank. My porsche stock is rockin' (although I am having trouble selling it - but that is a totally different story).

Here is a beginner article on exchange rates:

http://www.investopedia.com/printable.asp?a=/articles/03/020603.asp

An article on Forex trading, there is some valuable information in here, but all of it may not be interesting to you:
http://www.investopedia.com/university/forexmarket/

And here is one more:
http://www.newyorkfed.org/education/fx/foreign.html

Happy reading

The slide of the dollar is helping me. My $11million project is turning into a $14million project.

Use the McDollar. :) From economist.com a quick reality check that is surprisingly accurate:

Big Mac Index

Burgernomics is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two countries should move towards the rate that equalises the prices of an identical basket of goods and services in each country. Our "basket" is a McDonald's Big Mac, which is produced in about 120 countries. The Big Mac PPP is the exchange rate that would mean hamburgers cost the same in America as abroad. Comparing actual exchange rates with PPPs indicates whether a currency is under- or overvalued.

Thanks everyone for the good words, links, etc. It looks like India may be a 2-3 season intermediate before going to China, just can't stand the concept though.

here's a rambling recap of the trip:

http://forums.pelicanparts.com/showthread.php?threadid=346624


Red, how's that work, your $11M going to $14M?

As people stated already the weak dollar is back door fiscal stimulus for the domestic economy and every president since Nixon has had an off the record weak dollar policy, this is nothing new. In fact the dollar vs the yen fell all the way to 80 in the spring of 1995.

Oh by the way I traded currency options for a HUGE IB for 10 years.

India might be the one place where they dont eat Big Macs!:rolleyes: