Sure, when Saudi Arabia pulls $100-$200 billion out of the US economy, it has a minor, short term effect on the dollar, but keep in mind that the economic clout of the entire Islamic world is just a pathetic drop in the bucket compared to Europe (or Asia for that matter). It’s really the dynamics of the US – European relationship that principally drives the Dollar vs. Euro fluctuations.
As shown in the graph, the weakened dollar is still a bit stronger than at the Euro’s debut a few years ago.
For that matter, the dollar was probably overvalued anyway (just like the US stock market was) and a slow, steady adjustment downward is actually favorable to the US economy and American multinational businesses, who can now translate their foreign earnings into more dollars. A lower dollar bolsters the price competitiveness of the US economy as a whole, and foreign investors can buy more dollar-priced equities and other assets. Hopefully the trade deficit will come down a little as the dollar declines.
Current Events » in reply to Moslem economic embargo
Not really.