The Economist: British perspective on fall of the dollar

[La_Serpiente]

I’d buy that for a dollar (and two dimes)

The euro is worth $1.20 for the first time in its history. That may hurt Europe. Will it help America?

TIME to hail the almighty euro? During trading on Friday November 28th, the currency was worth $1.20 for the first time in its history. It continued to hover around that price on Monday. Europe's exporters will bewail this development, but for everyone else involved in the European project, the currency's strength will bring some satisfaction. After being introduced at a rate of $1.17 in 1999, the euro slumped to become worth less than 83 cents the following year. But the euro’s weakness in those humiliating days was not evidence of a congenital defect in the new-born currency. Rather, it reflected the unusual strength of its older rival, the dollar. Likewise, the euro’s rise since February 2002 should not be taken as a great vote of confidence in the economies of the euro area. It is, instead, the flipside of the dollar’s fall.

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Fall of the Dollar

[gristy]

1. Interesting read

So if the dollar goes into "free fall" if/when Asia's banks stop buying dollars, that will quickly push the Euro above the author's estimated "pain threshold" of $1.20-$1.25. What happens then?