Dollar Drop Accelerates

This is pretty troubling. There have been worried comments from some economists here and there, but this is the first time I've seen anything in print. The GOP just voted to expand the national debt ceiling, so that the government can increase the deficit. The world has the reaction you'd expect.

From the Financial Times:

"The US currency came under renewed selling pressure the moment it became clear George W. Bush had been re-elected president. In the two and a half weeks since then, the alue of the dollar has fallen 2.5 percent against the euro and 1.9 percent against the yen. The falls represent an acceleration of the dollar's steady decline since 2002. Since the start of that year, the greenback has fallen 32 percent against the euro and 21 percent against the yen. . . .

Darek Halpenny, currency analyst at Bank of Tokyo-Mitsubishi, points to a "very grim" outlook for the dollar in the near term. "With the foreign exchange market now focused entirely on the problem of the US budget deficit and current account deficits, there is a real risk that dollar selling becomes a crisis of confidence," he says. . . .

There is a fear in the currency markets that the dollar's decline, which has been gradual and orderly so far, will turn into a rout."