The dollar’s relentless fall against major currencies has accelerated of late after the recent G7 meeting in Washington produced no statement from the US Treasury supporting the beleaguered currency. With the dollar on a downward slope since 2002, the latest bout of weakness has led to forecasts of continued dollar declines in 2008. We strongly disagree.

A major factor behind the dollar’s depreciation after 2001 was the fear that the surging current account deficit could not be financed indefinitely, and that a plummeting dollar was necessary to force American consumers to curtail their imports.