Terrorist attacks could cause as much damage to the dollar as our ongoing trade spats, economists warn.
The greenback slid again yesterday against most currencies following bombings in Istanbul that killed 27, the latest in a rash of global terror attacks.
“If we see an acceleration of these kinds of bombings, the dollar will continue to grow weaker against other currencies,” said Dr. David Richardson, an economist at the Washington-based Institute for International Economics.
The dollar has slipped in recent days over growing trade tensions between the U.S. and its biggest trading partners, China and Europe.
The greenback tumbled earlier this week after President Bush did some saber-rattling against China and imposed new restraints on some of its goods imported here. Meanwhile, Europe is threatening to impose heavy tariffs on U.S. goods, including citrus from Florida – an important state in Bush’s reelection bid.
Part of the dollar’s plunge yesterday was also blamed on the evacuation of the White House following a false alarm caused when a plane came too close to the surrounding no-fly zone.
American companies want a weaker dollar so their products can be sold more cheaply aboard, but some economists think it’s a harmful short-term policy. The dollar is down 12 percent against major currencies.
“We have a benign neglect policy to the dollar weakening,” said Richardson. “It may be good in the short term for a year or two, but over the long term it’s not a healthy policy.”