Vacationing abroad? Dollar crisis has preceeded you
Antique store owners in lower Manhattan, ticket vendors at India’s Taj Mahal and Brazilian business executives heading to China all have one thing in common these days: They don’t want U.S. dollars.
Hit by a free fall with no end in sight, the once mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad; its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.
Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.
Negative dollar sentiment is growing in nations where the dollar was historically accepted as equal or better than local currency - and dollar aversion is even extending to some quarters in the United States.
At the Taj Mahal, dollars were always legal tender, alongside rupees, for entry.
But because of the falling value of the dollar, the government implemented a rupees-only policy a month ago.
Indian merchants have also turned bearish on the dollar.
"Gone are the days when we used to run after dollars, holding onto them for rainy days," said Vijay Narain, a tour operator at the Taj Mahal.
In Bolivia, billboards feature George Washington’s image on a $1 bill alongside a bright pink 500 euro note, encouraging savers to turn to the euro to tuck away money earned abroad or sent home in remittances.
say the signs popping up around La Paz for Bolivia’s Banco Bisa.
And in neighboring Brazil, the Confidence Cambio money-changing service was the first to start offering yuan so travelers to China no longer have to change the money into dollars first.
The service is already a hit because Brazil does big business with China, and lots of Brazilians are heading to the Olympics this summer.
"Now we tell people not to take dollars when they go abroad, it’s better to change it directly to the local currency," said Fabio Agostinho, one of the firm’s managing partners.
"If people leave here with dollars and go abroad, they lose when they exchange them.
It’s the same thing whether they’re heading to China, Europe or even Argentina."
In Manhattan’s Bowery district, Billy LeRoy, the owner of Billy’s Antiques & Props, prefers payment in euros so he can stockpile the currency for his annual antique buying trip to Paris.
The dollar has steadily eroded in value against the euro and other currencies since 2002 as U.S. budget and trade deficits ballooned, but fears of an American recession and credit crisis have sent the dollar to stunning lows amid predictions the slump will continue for a long time.
During previous U.S. economic downturns, big foreign funds typically snapped up U.S. treasuries, helping to shore up the dollar to a certain degree.
But the euro and currencies from other nations are now seen as legitimate options, and interest rates are higher outside the United States - meaning the funds can get better returns on investments elsewhere.
Nations that were once seen as incredibly risky for investments - such as Brazil - are now seen as good long-term bets.
And countries such as China and Russia, with burgeoning coffers of money to invest abroad, are thought to be shifting some of their reserves or diversifying fresh income to destinations and currencies outside the United States.
It used to be important for most countries "to accumulate dollars as a precautionary element against rainy days, but the accumulation of reserves has become so large in most emerging market countries that the balance is way beyond what’s needed for precautionary reasons," said Eliot Kalter, a fellow at Tufts University’s Fletcher School of Law and Diplomacy and a former International Monetary Fund official.
In Peru, where savings in U.S. dollars were long a popular hedge against inflation, many citizens are closing dollar accounts in favor of Peruvian soles.
- Source: Summarized from AP report at SunJournal.com
