We read:
"Ruby Bernal wasn't self-conscious about her American Indian heritage until her adolescence, when a band of teenage boys called her "squaw" during a drive-by heckling.
"It's like saying the 'N-word' to a black person," says Bernal, a member of the Shoshone-Bannock, one of five tribes with reservations in Idaho.
"To me, it's a slap in the face. It belittles me and it belittles all Indian women." ....
Now one of the Northwest's most influential American Indian tribes is campaigning to wipe the word off the names of 11 creeks, bluffs and canyons in Idaho.
Source
An earlier (2001!) episode in this "controversy" is recorded here (scroll down). I suspect that the term is only derogatory if you think it is.
There is a derogatory term for an ignorant and uncultured Australian: "ocker". Most Australians accused of being an ocker, however, would do little more than laugh. "Too right, mate" (a form of good-humored agreement) would be the most likely reply. (I guess the word is much like "redneck" in the USA). Rather sad that so much of the world lacks the maturity to respond that way.
