What is happening in the world economy with the exchange rate dollar and euro? After the fall of the Asian markets in 1997, these have succeeded in recovery and actually they have a very important place in the world economic system.
The force that Asian markets have got, make them be an important element in the dollar and euro fight. Countries from the Middle East, above all China, have started an important commercial relationship with the United States.
China is the country that has more accumulated reserves in dollars, this maintenance and storage in dollars in the Middle East allow the United States tu continue importing products and services.
The problem of the Asians will get worse if in the exchange rate dollar and euro, the dollar continue losing. The United States buy dollars to other countries and those bills return borrowed to their economy by these countries while buying Exchequer bonds. The dollar system consists on having the dollar for free to the favored one (United States), as the interest rate that it will have to pay, and the capital borrowed for the bonds are returned with the benefit that have the United States in being the one that can issue currency having no other authority.
An uncontrolled dollars emission makes liquidity excess and the more dollars market supply we have, as it is happening today, the bigger the devaluation that this currency will suffer. Some days ago, the titular of the European Central Bank confirmed that the money cost (interest rate), in Europe it will continue being 4% , while in the Fed they are still discussing if they will reduce the interest rates, to improve the value difference that there is actually with the dollar and the euro, and so have the strong currency that we used to have some years ago.