Azerbaijan, Baku, Dec. 22 / Trend A.Badalova /
International experts say the U.S. dollar will strengthen its position as the world's dominant currency as the U.S. economic heads to recovery.
"The dynamics of the greenback is the same as before. The U.S. is a big and financially liquid market which offers many investors relative stability, also on the currency side," Director of the European Centre for International Political Economy (ECIPE) Fredrik Erixon wrote to Trend in an e-mail.
The crisis has pushed dollar down a bit against many other world currencies and there have been plenty of calls for a managed decline of the currency to help restore America's current account deficit, he added.
"Yet those pressures will abate as the economy continues to recover, albeit at a slow pace," he believes.
The global financial crisis has largely shattered the U.S. dollar as a reliable global currency. Despite the fact that the dollar is gradually recovering, some still voice the desirability of introducing a new world currency. In early December, Kazakh President Nursultan Nazarbayev also voiced the initiative, saying that "the global economy today needs the world's reserve currency of the new quality."
Instability in global financial system and weakening of the dollar in recent years has also led to an increase in popularity of gold among investors and its cost increase. Since early 2010, the price of gold has risen by 26 percent. Gold was considered as an alternative to currency volatility.
According to Erixon, the fall of the dollar will not increase the role of gold as a reserve currency.
Despite the drop, Erixon still regards the U.S. currency as stable.
The dollar has a few restrictions on capital mobility, meaning that American authorities cannot force its value in any direction without inflicting damage on its own economy, making dollar a stable currency, Erixon said.
Erixon also showed belief that dollar will increase in value and recover the value lost of the past years, while the position of the European currency will fall.
"There are currently strong downward pressures on the euro because of the banking crisis, Europe's inability to deal with it, and weak recovery in many parts of Europe," he said.
According to him, the only contender of the U.S. Dollar is the Chinese Yuan, which will certainly increase its role in the world economy.
However, he said, such a factor as the Chinese currency policy is was still not transparent for financial markets to understand what defines the movements of the Yuan and holds back the rapid growth of the currency.
British Capital Economics projected that in 2012, the dollar will equal the rate of Euro.
"We expect dollar to strengthen in parity with euro next year. This reflects both cyclical factors - a stronger economic recovery in the U.S. than in Europe - and structural factors - growing doubts bout the future of European Monetary Union," Chief International Economist at the Capital EconomicsJulian Jessop wrote to Trend in an e-mail.
In 2011, according to forecasts, the rate of the dollar to the euro will amount to 1.1 compared to the current 1.31.
At the same time, Capital Economics analysts expect continued growth in gold, even against a strong dollar.
"The growing concern about the disintegration of the euro zone will support the demand for gold," Jessop said.
The British company forecasted that the gold price will be $1600 per troy ounce in late 2011 and $2000 per troy ounce - late 2012.