For several years now, the US dollar has been weak against most other currencies, despite still being the currency of reference in international trade. There was a strong but brief resurgence in its value when news of the US financial meltdown made headlines. Bad news is good news for greenback? What’s behind these upside down money markets?

The mighty dollar isn’t so mighty as it once was. First came the Euro, its first real competitor in the money market, followed by the roaring growth in China, Brazil, India and countless other economies that suddenly came alive. Their currencies became desirable and liquid rather than something you converted to a stronger currency such as the dollar to keep its value from being eroded by rampant inflation. The only factors which could now weaken these currencies are either local or world crises, which undermine investor confidence in the treasuries of export dependant nations and favors the US dollar, backed by the biggest and strongest domestic market on the planet.

For those of us who are rabid travelers or expats and are paid in dollars, what this all means is a big bite in our buying power when abroad. The monthly rent on your apartment suddenly passes from 500 to 700 dollars, even though the cost in the local currency has not changed! Visiting Japan, Brazil or Australia has now become a budget-buster and more than one adventurer cut back or even cancelled their next dream trip! There isn’t a lot you can do against these precipitous drops in the dollar’s value, except perhaps try to convert more to the local currency when the dollar has a significant uptick, because recent history shows us that such increases are always brief! Unfortunately, the dollar’s weakness looks to be a long term trend.

Although most countries’ currencies are now a lot stronger against the US dollar, there’s a few that have actually gone the other way. For instance, you’ll get more Argentinean Pesos for your dollar than in prior years (4.1 per at time of writing), although thanks to local inflation you might not actually get more goods for your money. The British Pound is quite a bargain too, costing you about $ 1.60 when it used to be about 2 dollars prior to the crisis. The Hong Kong dollar, on the other hand, has hardly changed in value since the former British colony was turned-over to China in 1999. Then there’s countries that peg the value of their currency on the dollar, thus protecting you from currency inflation: Panama, Ecuador and El Salvador, as well as a few British and Dutch islands.

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