Forex Blog: Currency Trading News & Analysis.

March 17th 2005

Current Account Deficit sets record

The US current account balance encompasses all capital inflows and outflows, in investment, trade, etc. At $650 Billion and climbing, it continues to set records. American businesses and consumers have a seemingly insatiable appetite for foreign goods, namely oil. The foreign businesses which sell to the US, also seem to have no problem reinvesting their dollar-denominated profits into American debt and equities. But, warn economists, this may well change if the USD continues its decline. In which case, foreign investors and creditors would likely rush for the exits en masse, exerting severe downward pressure on the dollar and upward pressure on American interest rates. This would have a detrimental impact on economic growth. CBC news reports:

The administration has insisted it believes in a strong dollar for fear of provoking a sharp sell-off in the currency. That would destabilize U.S. financial markets while doing nothing to halt the greenback’s gradual decline.

Read More: US Current Account deficit hits record in 2004

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Posted by Adam Kritzer | in US Dollar | No Comments »

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