If you look at it from Buenos Aires it still seems pretty strong

If you look at it from Buenos Aires it still seems pretty strong. This rise against these so-called minor currencies includes the stable rate against the Chinese renminbi, for the renminbi is pegged to the dollar. It follows that a fall in the dollar does nothing to cut the US trade deficit with China, now running at more than $12bn a month. Allow a few points on either side as a trading band and the dollar is within it but not yet at the mid-point. And of course past experience suggests that currencies often overshoot so it would be perfectly plausible for the dollar to fall further.The sad thing is that this would not help much because the dollar is falling against the wrong currencies.

The second graph shows the quite modest fall when measured against a broad trade-weighted index (red line) and the much sharper one against major currencies, mostly the euro (blue line). But against minor currencies the dollar has actually strengthened and some of these, such as the currencies of Latin American countries, are quite important to US trade.We focus on the dollar-euro rate but the fall against the euro is exceptional. If you look at the dollar from Frankfurt or Paris it has become very weak. But a fall of the dollar is only helpful to the world economy if it helps narrow the current account deficit. The danger is the decline will not do much to correct the deficit and will damage the eurozone’s recovery.To see these concerns, start by having a look at the graphs. The dollar has come down sharply this year on its weighted measure (first graph) but it is not at bargain basement levels by historic standards. It did not rise by as much as it did during the mid-1980s surge but it is only just heading towards its long-term fair value.That fair value level has been calculated by the ABN Amro economics team at 95 on the dollar index – with 100 in 1973.

The dollar fall may or may not be mostly over but it has already moved far enough to have an impact on the world economy. Trouble is, it is not a very helpful impact in the sense that it is unlikely to lead to more balanced growth.
There may be plenty of practical reasons why the dollar has fallen, including of course the widening US current account deficit, the difficulties of financing that deficit and hopes of a better economic performance in the eurozone. Alternatively he could demonstrate the extent of Blair’s dependence and his own power by rescuing him. On another reading the collapse of the policy would damage his legacy almost as much as Blair’s authority. Either way, however, if MPs want to show their displeasure with the Prime Minister they would do better to consider an issue on which they are on the right side of history rather than the wrong one.d.macintyre independent.co.uk
More from Donald Macintyre. Goodness knows Blair has used up much of his political capital in the party mainly but not only over Iraq. Although Gordon Brown has now scrupulously stated his support for what is after all government policy, ministerial supporters of top-up fees will still be looking for him to use his influence to try to persuade those of his allies prominent among the dissenters to fall into line.On one reading this is a no-lose situation for Brown.