U.S. dollar ($)
The dollar continues to be vulnerable in the foreign exchange markets despite the economy's vitality. The dollar has lost value against all the major currencies including the euro, yen, Swiss franc, and British pound sterling. The dollar has declined in value primarily because of the burgeoning twin deficits (fiscal and trade) and the unfavorable interest rate spread between the U.S. and especially the EMU, Britain, Canada and Australia. Now that equity prices have turned around globally after three years of declines, investors are shifting their focus back to growth and future returns even though they continue to fret over U.S. growth.

The allure of U.S. assets, particularly at the end of the 1990s, bid the dollar up in value as investors competed for positions in the equities market and purchased companies for a place in the U.S. market. Now, currency market players pounce on anything negative United States despite the on-going problems in Europe and Japan. The plus side of a weaker dollar is that it makes U.S. exports more competitive abroad. It also raises the value of repatriated profits to the United States. But despite the dollar's decline, imports continue to soar because exporters overseas do not want to lose market share by raising their prices.

The U.S. dollar has been more vulnerable of late as overseas investors ponder the health of the U.S. economy. As a result, the dollar has declined against most major currencies.