Exchange Rate (October 3rd 2011)

The US dollar would likely continue to appreciate because concerns over the Greek debt is intensifying. Uncertainty of when Greek would receive international aid from lenders also adds to concerns of investors. In fact, it has been announced that the European Union is now holding off on providing further financial aid since Greece has said that they will not be able to meet their deficit targets this year due to expectations for a deeper recession that what has been forecasted. Thus, investors would turn to US dollars in this case, leading to continued appreciation of the US dollar at this time.

Furthermore, this is the first time that many investors are favouring the US dollar rather than stocks and bonds, due to the slowing growth from Europe's debt crisis. The US dollar has a share of 60.2% of the world's currency reserves. The second biggest share is the Euro at 26.7%, and since their debt crisis has turned investors to the US dollar now, this further supports the prediction that the US dollar would continue to appreciate. In turn, exports would become more expensive and demand would decrease, thus prices of commodities would be expected to decrease.