Oil and the U.S. dollar -- they're the talk of the town of late. The declining value of the dollar has often been cited as a major factor behind surging oil prices, which topped $143 a barrel Tuesday.
But the dollar has been on the decline since 2000. It has fallen by almost 40 percent against the euro, albeit with over 60 percent of that decline occurring in the last two years. The dollar has fallen over 30 percent against the Canadian dollar, around 17 percent against the British pound and 7 percent against the Japanese yen.
U.S. Treasury Secretary Henry Paulson has been actively pushing for a stronger dollar. In a recent interview with Reuters, Paulson said, "I would agree that a strong dollar is a good thing and I believe it is in our nation’s interest."
Paulson reiterated previous comments, where he suggests that although the U.S. economy is going through a rough patch - in the past he has referred to a “trio of headwinds” of rising oil prices, the housing slump, and roiled financial markets.
But there are those who disagree. Wilbur Ross, chairman and CEO of WL Ross & Co told CNBC Wednesday, "I'm one of the few people as an American, who likes the weak dollar. I believe that the only way that we can compete with our high wages and high standard of living is by a weaker dollar, so I'm actually an advocate of the weaker dollar."
Ross added that the rate of growth in U.S. exports had exceeded the rate of imports ever since the dollar started its descent. "I believe one of the few things that's helping to bolster the economy now is the growth in exports. Not that we have unbalanced a favorable trade balance -- we have not -- but there has been pretty good growth in exports driven by the weak dollar," Ross told CNBC.
When asked whether increased productivity would be preferable to a weak dollar, Ross said, " Productivity growth has been pretty good in America, and continues to be. Wage inflation hasn't been much of a problem either ... but in productivity, you're talking about a few percentage points a year. That doesn't close the gap between $5 an hour and $40 an hour.
The U.S. dollar steadied against the euro Wednesday after falling Tuesday on expectations for the European Central Bank to bump up interest rates later this week. The dollar was little changed against the yen, supported a day after Institute for Supply Management data showed U.S. factory activity unexpectedly expanded in June after four straight months of contraction.