Dollar slide - Reasons and what it means

Dollar's Decline Speeds Up, With Risks for U.S.

Excerpts:

The U.S. dollar's downward slide is accelerating as low interest rates, inflation concerns and the massive federal budget deficit undermine the currency.

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The main driver for the dollar's decline is low interest rates in the U.S. compared with higher and rising rates abroad. Lower rates mean a lower return on cash—and the pressure from that factor could intensify next week when the Federal Reserve's rate-setting committee is expected to signal that U.S. short-term rates will likely remain near zero for many months to come. On Wednesday, Fed Chairman Ben Bernanke is scheduled to give the central bank's first-ever press conference following a policy-setting meeting.

But it is worry about the U.S. budget deficit that is intensifying the selloff. On Monday, investors were spooked by a warning from Standard & Poor's that it might take away the U.S. government's coveted AAA rating status amid concerns the Obama administration and Republicans in Congress might not be able to agree to significant reductions in the deficit.

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A weaker dollar is a boon for U.S. exporters by making their goods more competitively priced. This has been a tailwind for technology companies and manufacturers, a bright spot in the otherwise slow economic recovery.

Comment: But bad for imports.