Education, Market News, Opinion|December 4, 2010 10:06 pm

Why the US Dollar Has Not Crashed?

Considering the budgetary deficit and the trade deficit that US is facing the US dollar should have crashed. This was the projection by many analysts. But, would it?

China, the factory of the world runs huge trade surplus with US. What does China do with all the US dollar that it earns? They are investing in US dollar. When they keep buying US dollar, the US dollar maintains its strength because of demand and supply. A strong dollar makes Chinese products cheaper to US consumers and that is why the US market is flooded with Chinese products. Chinese have invested in technology that has enabled it to produce quality products and US consumers have no complaints.

US and China have developed such a synergy between them in trade that Us needs China to stay alive and China needs US to buy what they produce. If one pulls the rug both would crash. The chances are remote.

US dollar is here to stay. Not to worry.

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