The National Association of Manufacturers (NAM) said on May 3 that the dollar still remains nearly 10% overvalued and is a major cause of the increasing trade deficit.
Although the dollar has dropped 13% since its peak in February 2002, John Engler, president of NAM says that a " further decline in the dollar is not a negative sign for the U.S. economy. In fact, with a correctly valued dollar, we should see a pick-up in our exports, resulting in the growth of profits and jobs for U.S. producers."
Engler pointed out that while the dollar has dropped significantly against the euro and the Canadian dollar, there has been less then a 3% decline vis--vis the Chinese yuan. "Among the currencies of our major trading partners, the Chinese yuan stands out sharply as the rock that refuses to budge. The Chinese government can only achieve this in the face of global market pressure by buying massive amounts of dollars to prevent the yuan from appreciating. The magnitude of this pressure on the yuan can be seen by the fact that China has now accumulated almost $900 billion in foreign currency reserves," said Frank Vargo, NAM's vice president of international economic affairs.