THE FLUCTUATIONS OF USDOLLAR & ITS EFFECTSTOWARDS THE WORLDECONOMY NAME MATRIC NO. LIM SHI YING (LEADER) BG 0911 0373 LEE KIT YI BG 0911 0329 LIM WOON SIN BG 0911 0374 SHALANI D/O NADARAJAH BG 0911 0278 TAI SIANG YING BG 0911 0111 TANG HWEE PING BG 0911 0093
INTRODUCTION significant dominant currency roughly two thirds of all official US DOLLAR exchange reserves denominated in more than four-fifths of all foreign exchange transactions lead the purchasing power of US consumers Mid -2009 , began to turn down again
OBJECTIVES To investigate the factors that influence the US dollar. To determine the impact of the US dollar fluctuation towards the world economy, and the countries that have been affected the most. To evaluate the policy that has been implementing to the fluctuations of US dollar.
FACTORS INFLUENCE U.S. DOLLAR Trade deficits downward pressure dollar value Housing bubble speculation in house value Size and liquidity of U.S asset markets the foreign central bank increase foreign reserves Interest rate Treasuries declines, the investment is less attractive
CONTINUED… Currency peg weaker currency would peg itself Market psychology expected the future path of dollar Inflation purchasing power of currency Gold fundamentals dollar decrease, gold increase.
THE EFFECT OF US DOLLAR FLUCTUATIONSTOWARDS THE WORLD ECONOMY Gradually depreciation - rebalancing of the US current account deficit - strengthen domestic demand - broaden world economies Sharpen depreciation - Weak domestic demand - decline in export
CONTINUED…- lower growth in the countries who rely on export to US.- Lead to rising inflation Dollar appreciated - increase the purchasing power - increase import demand, stimulate exporter countries economy growth.
THE COUNTRIES HAVE BEENAFFECTED THE MOST The Economy of the Middle East The economic conditions in the United States The impact exchange rate is seen on oil demand and supply. Japan and China.
CONTINUED…. affects the output of the East Asian economies in both trade and foreign direct investment. Affects India’s economy. The value of total U.S trade with Africa had increased.
POLICY TO RESPONSE 1) Government direct intervention in the Foreign Exchange- Treasury buying or selling foreign exchange 2) Monetary policy- changes of interest rates
CONTINUED…. 3) Fiscal policy & Federal debt - Government’s spending and taxing 4) Lower foreign trade barriers -boost the demand for U.S. goods and services
CONCLUSION depreciation of U.S dollar value has great influences World economic effect Policy response Eurodollar