How US suffers when the dollar falls
When the euro began circulating at the start of 2002, Kenneth Rogoff figured it would take 50 years for the new 12-nation currency to rival the importance of the United States dollar in world financial markets. Today, the former chief economist of the International Monetary Fund says parity could come in five to 10 years.
For the first time in many decades, perhaps since before World War I, the dollar has a serious competitor.
"Euros are coming more to the front," says Ulrich Ramm, chief economist of Commerzbank in Frankfurt. "It's a real alternative ... to the dollar."
If Washington is intent on spreading its influence in the world, the dollar's fall makes it harder - and more expensive - to expand its military and political reach.
Of course, the dollar is far from powerless. It's the currency used in most international trade. It's how oil and important metals are priced on international markets. The market for bonds denominated in dollars is far bigger, and thus more useful for many borrowers, than that for euro bonds. Nations still hold the great bulk of their international monetary reserves in dollars.
"I don't see two heavyweights slugging it out," says Richard Reid, an economist in London with Citigroup.
Nonetheless, the dollar has suffered setbacks that make the euro look increasingly attractive. Since it peaked in value three years ago, the greenback has declined 17 percent against a basket of currencies of key nations that trade with the US. The euro has 33 percent more buying power in the US than three years ago. Canadian dollars are worth 22 percent more, British pounds 25 percent.