The peso value of dollar-denominated foreign debt went through the roof, leaving Argentina with no choice but to default.
Like Volkswagen and other German carmakers, BMW is benefiting from a weaker euro, which raises the value of dollar-denominated sales when converted into euros.
The motivation for diversification is understandable: Since July 2005, the Chinese currency has been appreciating against the U.S. dollar, so that in terms of local purchasing power, dollar-denominated holdings have been losing value.
Such a move would erode the value of dollar-denominated securities, and with interest rates rising overseas, incentives for foreign investors to put money in the United States is declining.
Desoufflage is therefore being felt through the loss in the value of dollar-denominated assets and the knock-on effects of this.Georges Hébert Westmount, CanadaPolitical theory* SIR – The Anarchist Anti-Defamation League has informed me of The Economist's latest vile slur, absurdity, and calumny against anarchy.
Given talk of additional tax cuts, Asia is wise to worry about the value of dollar-denominated holdings.
That makes imports of things like oil more expensive, but it also reduces the value of dollar-denominated debts like Treasurys that Americans owe to foreigners.
That many believe the Fed will find it hard to resist the short-term response of letting inflation rise is reflected in rising gold prices and rising concern abroad about the value of dollar-denominated assets.
A rising yen hurts Japanese exporters, like Toyota and Sony, by reducing the value of their dollar-denominated profits when changed into yen.
BASF benefited from the dollar's climb against the mark last year, which makes its products more affordable in the United States and bolsters the value of its dollar-denominated sales.
China has accumulated $2 trillion in foreign reserves, mostly in Treasury bonds and other dollar-denominated assets, and held down the value of its currency, which has kept Chinese goods quite inexpensive in foreign markets.
