Rabobank urges global central banks to prevent possible dollar plunge

AMSTERDAM (AFX) – Economists at Rabobank have called on the world’s central banks to undertake action to prevent the US dollar from plunging against the euro and other currencies.

Citing current ‘instabilities’ such as the US trade deficit and the US national debt in the bank’s quarterly economic review released today, Rabobank economists are urging central banks to ‘undertake a coordinated effort to bring down the value of the US dollar to a more sustainable level’ vis-a-vis the euro.

The bank’s economists point to the fact that the Chinese central bank has thus far been buying US dollars on a large scale, thus effectively supporting current currency trading levels, but the researchers said that several factors may force the Chinese central bank to stop buying dollars, which could result in a worldwide sell-off of US dollars by currency traders as confidence in the currency would fade.

Some of the factors mentioned could be protectionism of the US domestic market by lawmakers, or an oil-exporting country like Iran deciding to switch to the euro instead of the dollar for oil trading purposes as a result of political tensions, the economists said.

Forbes