Dollar bouncing back to the Pound in the near future?
For years and years it seemed the British Pound was worth about $1.50 to $1.70. However, since late last year the Pound skyrocketed overnight to about $2.00. Why did this happen so quickly, and will we ever see the old rates any time in the near future?
2007-09-22 03:02:37 · 4 answers · asked by Rita K 1 in Social Science ➔ Economics
interest rates in the US need to increase RELATIVE to those in the UK OR opportunities need to increase in the US relative to those in the UK. These events will increase the demand for dollars and decrease the demand for pounds, which will result in an increase in the price of dollars relative to pounds.
2007-09-22 03:09:57 · answer #1 · answered by Homer J. Simpson 6 · 0⤊ 0⤋
The fall in the dollar was a long overdue correction in response to our large trade deficit and low savings rates. According to trade theory we should have had a slow but steady decline of the dollar as the trade deficit grew, but foreign investment kept the demand for the dollar high, so the exchange rate did not adjust. Since investment flows unlike trade can react rapidly, once it started the adjustment time was short. US exports should increase and imports decrease under the new exchange rates and the dollar will stabilize, but at a lower level the it was and it will take time.
2007-09-22 04:28:52 · answer #2 · answered by meg 7 · 0⤊ 0⤋
at 2 dollars to the pound its great for visitors to the states.
2016-05-20 23:18:08 · answer #3 · answered by Anonymous · 0⤊ 0⤋
The U.S. dollar has been and always will be the standard for all currency around the world. Watch and see. (hint) Don't give away any of your savings.
2007-09-22 03:14:38 · answer #4 · answered by chilicooker_mkb 5 · 0⤊ 0⤋