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Across My Desk: Value of the Dollar

If you've traveled to Europe lately you've experienced first-hand how little the US dollar buys. I returned from Scotland last month and was astounded when I exchanged 100 US dollars and received 46 pound sterling in return. Confounded, I asked the teller what could I buy with 46 pound sterling. He said, "Not much."

One of the reasons the dollar has fallen so much in value is because of a lot of investors are investing their money overseas.

According to Bloomberg, three-quarters of $113 billion in flows into mutual funds through August of this year have been into international mutual funds. And, with everyone from individual investors the money that pension and endowments are investing is also going abroad--- all of which pushes the value of the US dollar down.

Here's more from a September 19, 2006, piece from online news source, Money Management Executive:

"Stephen Jen, head of global currency research at Morgan Stanley, estimates that 50% of the decline in the dollar over the past three years is due to overseas investing. "This does make us bearish on the dollar," said Michael Metcalfe, senior currency strategist with State Street Global Markets. "The home bias of U.S. investors is continuing to unravel."

By mid-September, the dollar had declined 7%; since 2003, it has dropped 21% in value. Ouch.

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