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The article focuses on the decline of the dollar in the United States under President George W. Bush. Between the February 2002 peak and the December 2004 low in the value of the dollar, the American dollar lost 35 percent of its value against the euro, 22 percent against the Japanese yen and even 24 percent against the Canadian dollar. The major reason for the dollar's weakness is the profound imbalance in America's dealings with the outside world: We import far more than we export. The trade accounts slipped into the red in 1976, and the deficit has been getting steadily larger. Lately, the task of financing American deficits has fallen to the central banks of Asia, whose dollar assets (mostly U.S. government bonds) now collectively surpass $1 trillion. China has successfully kept the value of its currency, the yuan, unchanged against the dollar--and kept Chinese exports growing mightily. Markedly higher interest rates would almost certainly knock the stuffing out of the housing market, ending the wonderfully stimulative game of borrowing against home equity, and tip the broad economy into recession.

The article discusses Asian currencies. The 2007 report by Chang Shu, Nathan Chow, and Jun-Yu Chan at the Hong Kong Monetary Authority on the influence of China's yuan on other regional currencies is explored. The "yuan block" in which the neighbours and rivals of China don't allow their currencies to rise against China's yuan or they could lose it as a customer, or lose out to it as a competitor, is discussed.

After sinking since the start of the year, the dollar has come up for air, gaining 4% against the euro in recent weeks. But it is quite likely to plunge again, pulled under by America's huge current-account deficit. So far the dollar's descent has been uneven. It has fallen by around a quarter against the euro since the start of 2002. But it has lost only 10% or less against the yen and many other Asian currencies, and it is unchanged against the Chinese yuan, although most of the Asian economies have large balance-of-payments surpluses. America's biggest bilateral trade deficit is with China. The Chinese yuan and the Malaysian ringgit are pegged to the dollar and protected by capital controls. The Hong Kong dollar is also tied to the greenback through a currency board. Officially, other Asian currencies float, but central banks have been intervening on a grand scale in the foreign-exchange market to hold down their currencies as the dollar has weakened.

The article discusses the economic conditions in Asia. The Asian economies have showed more signs of economic recovery than any other region following the global financial crisis but their currencies are severely undervalued and this calls into question exchange rates. The Chinese yuan was 21% above the American dollar in 2008 but as of October 2009 it is valued the same and its trade-weighted value has dropped 10%.

Comments on the budget and trade deficits of the United States. Clarification of the difference between the budget deficit and the trade deficit; Percentage of the U.S. economy's borrowing requirement being met by mainly Asian banks; Support of the U.S. dollar by Chinese monetary authorities out of fear a fall of the dollar against the renminbi could negatively affect their export industry; Reasons why the administration of U.S. President George W. Bush depend on Asia's support, including the fact that it limits the price of U.S. imports from Asia, raises the price of U.S. Treasury bonds and supports Bush's recovery through low long-term interest rates.

Presents updates on Asian currencies as of September 2003. Implications of the decision of Asian governments to hold their currencies down; Information on the Chinese yuan.