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http://business.timesonline.co.uk/tol/b ... 903375.ece
November 20, 2007
Friendless dollar is turned away at the gates of the Taj Mahal
The Taj Mahal and other top tourist sites in India are refusing to accept dollars to pay for admission, dealing another blow to the prestige of the weakened American currency.
Entry tickets to the world famous Mughal tomb in Agra and about 120 sites run by the Archaeological Survey of India will be available only at a fixed rupee rate after the dollar lost more than 12 per cent of its value against the local currency this year.
Tourists had been encouraged to pay in dollars where possible, a legacy of the time when foreign currency was difficult to come by because of Indias cash inflow restrictions. However, with the fall of the dollar against most other leading currencies and the surge of the rupee on the back of Indias booming and liberalised economy, the greenback will no longer be welcome at the door.
As a result, tourists will pay nearly a third more to enter Indias top tourist attractions by paying in rupees than the previous fixed dollar rate.
* Beauty deals beastly blow to US dollar
* Pound leaps to post 1981 high against dollar
The dollar has suffered other blows to its image of late, not least when it was reported that Gisele Bndchen, the Brazilian supermodel, would sign contracts that were paid only in euros because of the slide in the American currency although her agent was quick to deny the story for fear of angering clients in the United States.
The dollar has also suffered the indignity of being ridiculed by the American rapper Jay-Z, who chose to cruise the streets of New York in European-made Bentleys and Rolls-Royces with a briefcase stuffed full of 500 notes.
The Indian Ministry of Culture said that it was ditching the dollar to correct any anomaly caused by currency fluctuations that were adversely affecting its income.
The Government had fixed a $5 entrance fee for World Heritage sites such as the Taj Mahal and $2 for other monuments of interest at a time when the dollar was worth about 50 rupees. Buoyed by capital inflows into the surging Bombay stock market, the rupee rose yesterday to 39.28 rupees against the dollar.
The new fixed entry fee of 250 rupees and 100 rupees means that a foreign tourist will pay the equivalent of about $6.40 (3.10) and $2.50 (1.20) respectively. Indians pay a significantly lesser rate of about 20 rupees to enter official monuments, many of which are in dire need of maintenance. The ministry is planning to extend this favourable price to nonresident Indian citizens and to tourists from other South Asian countries.
More than four million tourists visited India last year, earning about $6.6 billion in foreign exchange. The unprecedented inflow of money from overseas has brought with it inflationary difficulties and problems for exporters, particularly IT services companies, which on average earn half or two thirds of their income from the US.
Indias central bank bought a record $11.87 billion in September to intervene in the rupees appreciation. It continued to be active in the currency markets in October and this month.
http://business.timesonline.co.uk/tol/b ... 859386.ece
From The Times
November 13, 2007
Beauty deals a beastly blow to the US dollar
Gerard Baker: American view
The saga of the declining dollar has turned from a drama into a crisis.
Weve got used to having Chinese officials hinting darkly that they might diversify their foreign exchange reserves out of the US currency, as they did again last week. We can even take it when Bill Gross, the worlds most influential bond investor, tells the public, as he did, also last week, that their investment strategy should consist of not buying anything that has a dollar sign attached to it.
But when Gisele Bndchen, the Brazilian supermodel, trashes your currency by insisting that she wants to be paid in euros, not dollars, it really hurts.
Since the dollar began its long decline against the worlds currencies in early 2002, the mantra from financial pundits has been that as long as the decline was orderly, everything should be all right. The dollar was overvalued; it would have to fall to get the current account deficit down and economic fundamentals were against it. Wisely, of course, no one ever tried to quantify what exactly disorderly would look like. It was generally asserted that, like the difference between art and pornography, you would know when something had gone from being orderly to disorderly without necessarily being able to define it.
So, is disorderly best measured in terms of scale? If you had told a British investor six years ago that his weakly pound sterling would buy two dollars and ten cents in six years time, he would have reasonably presumed you were describing the end of the world. But then some people insist that the scale of the movement is not what matters but the speed at which it happens. You could still argue that the 35 per cent appreciation of the pound against the dollar and the 45 per cent rise of the euro in the past five years has been fairly steady.
Now, however, the pace seems to have picked up. The Canadian dollar is up against its cheaper US counterpart by almost 20 per cent this year. Its hard to retreat in an orderly fashion at that kind of pace. And when the currency moves as much as 1.5 per cent in a day, as it did one day last week against the euro, then perhaps D-Day - Disorderly Day - has finally arrived.
And yet, for now, US policymakers seem unfazed. The Treasury will not change its increasingly comical verbal support formula of a strong dollar is in our nations interests, nor will it countenance wisely actual intervention to prop up the currency. Last week, the Federal Reserve, in the person of Ben Bernanke, gave a careful on the one hand, on the other hand assessment of the dangers of a rapidly falling dollar. No alarm there.
Abuse, of course, is being hurled at them from all quarters. From the Left, the dollars decline is seen as the global financial markets equivalent of the raised middle finger that greets President Bush almost everywhere he goes. They blame him for everything from the war in Iraq to Hurricane Katrina and say that the devaluation of the dollar is the hard market price of the loss of confidence in Americas leadership. This is not the place to argue about the merits of his policies, but Id have thought its a bit of a stretch to say theyre to blame for the dollars weakness. Even if you think the currency movement reflects in part the strength of oil prices, which it may, you cant really argue that is all about US policies. High energy prices still seem to be driven more by strong demand than geopolitical concerns.
From the Right comes even fiercer criticism. The obsessive types who think that everything went wrong when the world went off the gold standard 80 years ago - and who continue to have a suprisingly large following in America say that the Federal Reserve has debased the currency. It is tiresome to have to listen to this rant about how the Feds rate cuts in 2001-03 undermined faith in the US dollar and how the latest easing has weakened it further. Its not wrong, of course, to state that lower interest rates are likely to reduce demand for a currency, but what exactly was the alternative?
The US central bank averted a recession with its loose policies. Would the dollar be stronger or weaker now if the United States had had a nasty recession in the past five years?
Two factors are driving the dollar lower. The first is the steady, benign but unsettling unravelling of the financial imbalances that have haunted the world for five years. US growth is weakening relative to other developed countries and the current account deficit is narrowing. These are both desirable, but destabilising.
The other factor is increased discretionary demand from the worlds central banks to diversify their currency reserves out of dollars. This is often hailed, especially in Europe, as a sign of Americas declining global power, but the reality is that some rebalancing of global currency portfolios was necessary and inevitable. For years the US has provided a fifth of world demand and four fifths of world reserves.
The increased demand for euros does not signal either, as some claim, investors preference for European policy or the rise of a European superpower. Europes long-term relative economic decline remains on track. A stronger euro does not betoken a resurrection anytime soon.