On Tue, Feb 11, 2003 at 10:34:40PM -0500, William Dickens wrote:
> Should OPEC set oil prices in Euros and hold their cash reserves in
> Euros what would be the real consequences for the US? 1. A tiny increase
> in risk wrt oil prices (we know its tiny because the cost of currency
> hedging is minimal). 2. A tiny loss of income for the Fed from being
> able to print cash and create reserves as cash is repatriated and
> foreign banks accounts in dollars are reduced. 3. Some tendency for the
> dollar to depreciate which can be completely offset by slower money
> growth (this and 2 are really the same thing). Perhaps slightly more
> foreign exchange risk  for companies doing business with countries that
> cease to peg to the dollar.

Is it possible for another government to manipulate the US dollar in
a way that the Fed can't effectively counteract? OPEC switching to Euros
may not do it, but is it vulnerable in general? Have there been cases in
the past where countries tried to destablize the currency of others
on purpose?

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