April 7, 2005
India Daily
India and China have shown very little concern on a total collapse of US Dollar.
Developing countries that have amassed large US dollar reserves face a growing threat of big losses from a sudden decline in the dollar, the World Bank warned on Wednesday.
The trade and budget deficit, adverse balance of payments all point towards a lower dollar. But markets do not move the way you normally expect the market to move based on logic and information you get. All that is already factored in, says experts. The worst for dollar in over. However, World Bank was very clear in its statement.
In its 2005 Global Development Finance Report, the bank identified the “gravest risk” for emerging markets as a deep and disorderly dollar decline that would create financial market volatility and push up interest rates.
A dollar collapse, below what the bank's economists see as its long-term equilibrium level, could also result in “a costly restructuring of world industry that would have to be undone in following years as the dollar returned to its equilibrium level,” the bank said.
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