Critical Issues
Background:
Recent global financial instability and the spike in U.S. debt has prompted holders of the world's largest U.S. dollar (USD) reserves to reconsider the wisdom of adhering to the USD as the dominant reserve currency. The weakening US$ feeds into foreign investors' aversion to purchase long-term US securities unless yields begin to rise. Is the dollar zone crumbling? Will there be sufficient foreign demand for U.S. long-term securities to "finance" the mammoth U.S. trade deficit as risk aversion subsides?
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Associated Readings
Analysis
Federal Reserve Bank of New York
Linda S. Goldberg
Feb 05, 2010
Is the International Role of the Dollar Changing?