Why is the American dollar losing its value?

The American dollar aways loses value when the trend with the Federal Reserve is to reduce interest rates.

Other secondary factors include: (1) the government running a deficit budget, (2) an international trade deficit, (3) a slow down in the economy.

It's a function of demand on the dollar relative to other currencies. Part of that demand equation is related to interest rates. If the US interest rates are low compared to those of another country, generally (all else equal) demand for $$ will decline versus demand for the other currency. This is simplistic but imagine you have money to invest and you either buy a CD at B of A at 4% or Wachovia at 5%. Where do you go? Wachovia of course. In a currency market where the forces of supply and demand are constantly at work, investors will not go for the $$ if they're not going to make as much as let's say they would vs the Canadian $$ which has been strengthening versus the dollar.

There are tons of factor attributed to this. Put simply, the value of the dollar is lost when there is an excess of it.
So what is causing the excess:
1) Debt, Americans buy more imports and we export. So more money is exiting the US, creating what is called an Current Account Balance that is negative.
2) Government Debt: The US issues tons of bonds to pay off its debt which is purchased by foreign governments, foreign businesses and domestically. This, again, sends the US dollar abroad.
3) Inflation. When the excess of money on the market actually begins to affect the value of the dollar, this is called inflation and it literally eats the value of the dollar.
4) Speculation: When governments, companies and investors lose confidence in the strength of the dollar, they sell it in exchange for a stronger currency. Just like a stock, sell offs decrease the value as people unload on one and assume another. Currency trading (Forex) accounts for 2/3 of all trade transactions throughout the word. Do not underestimate the power of this market, cause so many people do. Remember, George Soros acutally broke the Bank of England through currency trading. This is why China refuses to open its currency to speculators.
5) There is also a process behind wanting this to happen. When the currency loses value, our exports become cheaper international...increasing the US economy, lowering our Current Account Deficit, Lowering the National Debt and also making imports more expensive. So in the natural ebb and flow of economies, this is part of the restoration phase of an economy; which is very important.
Also, bear in mind that some economies do not like it when the US dollar drops. China isn't happy. Japan isn't happy and the EU certainly isn't happy. They all lose out on their principle trading market and in turn it hurts their domestic economies. There was an actual meeting in the 1980s to sort of Peg the US dollar exchange rate to certain currencies to lower our debt but still keep imports cheap in this country...those who attended...EU members and Japan.

manipulation by the fed reserve bank.

Due to the mortgage crisis and the national debts.

It's because the US dollar is being seen as having less economic back-up than it used to. The demand for the dollar is therefore slowing down.

The underlying reasons for a weaker dollar:
- Budget deficits (more debt) - governement spending more than it earns from tax revenue.
- Trade deficits (export income less than import expenses)
- Low interest rates (lower interest rates cause more inflation)
- Increase in money supply (government prints more money to bail out financial institutions from going bankrupt by the mortgage crisis)
- Slowing economy (the economic output or GDP of US is slowing down - i.e., America is getting poor)
- Housing crisis (the main driving force of the US economy is slowing down, and thus it slows down the economy).
- Oil, which was exclusively sold in US dollars before, is now being sold in euros and other currencies (Japanese Yen, Russian Rubles, etc.)

Because the Federal Reserve keeps printing it out of thin air (well, at least 2 pennies worth of cotton and ink). That, and the increasing amount of Euro/other currency exchanges for Oil from certain countries.

Lack of ability to be able to properly protect proprietary information.

Because the last time a country decided to use the USD as currency was in 2001

El Salvador.

Nobody wants Al Qaeda as their enemy.
Nobody wants more buildings destroyed by airplanes.

In contrast.

The Euro is going to be used as currency in many countries.

CYP and MTL (2008)
SKK (2009)
LTL, BGN and EEK (2010)

The list goes on and on until 2014

Also, The new SUPER CURRENCY called Khaleeji will circulate in 2010

It all comes down to other countries economies outperfoming the US economy. Take a look at Canada for example. The comodities boom has drastically improved the economy there; there is a historically low unemployment rate. The US is just not positioned to excel with high oil prices and must keep lowering interest rates to try and booast the economy. This in turn lowers returns for foriegners investing the the US and the pullout and put there money in other countries currencies.

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