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This has reference to the news item “Commodities to outpace stocks and bonds” (Business Line, March 13) wherein it has been reported that prices of such commodities as crude oil, corn, gold, copper, soyabean and vegetable oils have risen to unprecedented levels in the context of the dollar slide in global money markets.

The dollar has traditionally been used by the international trading community both as a medium of exchange and as a storage currency as the dollar has universal acceptability and was not susceptible to depreciation.

But the faulty economic policies followed by the US have resulted in erosion of the value of US dollar and its consequent slide vis-À-vis other currencies.

This decline has resulted in erosion of the value of money kept in dollar denominated accounts.

The traders, therefore, started investing in commodities, thereby creating a demand-pull rise in their prices.

The best way to arrest such price increases is through promotion of alternative currencies.

P. E. Muthu Mumbai

More Stories on : Letters | Forex | Commodities

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