Is the U.S. dollar about to plunge?

By Money Matters Editors

Where’s the U.S. dollar headed from here? Well, if you’re in the camp that argues that both monetary and fiscal stimulus guarantee rising U.S. inflation, the dollar will likely weaken in the immediate quarters ahead, and probably for longer.

But if you’re in the camp that argues that given asset destruction, massive job lay-offs, and price power that is non-existent, the dollar will hold its own against the world’s other major currencies.

The dollar weakened about one-half cent Wednesday to $1.4811 and $1.6436 versus the euro and British pound, respectively. The dollar was virtually unchanged versus Japan’s yen at 91.13 yen. The dollar has weakened about 7 percent versus the euro and about 8.5 percent versus the pound so far in 2009. The buck is virtually unchanged versus the yen this year.