Green­back grows

Europe less at­trac­tive dur­ing cri­sis

Finweek English Edition - - Economic Trends & Analysis - GRETA STEYN

THE US DOL­LAR has surged dur­ing the fi­nan­cial cri­sis, de­spite the fact that the cri­sis orig­i­nated in the United States and its banks are hard hit. The graph shows how the dol­lar has strength­ened from close to US$1,60/euro not too long ago to around $1,25/euro.

It’s emerg­ing mar­ket cur­ren­cies such as the rand that have taken the big­gest strain against the green­back.

The US dol­lar has strength­ened against the euro as in­vestors liq­ui­date in­vest­ments bought at a time when in­ter­est rates heav­ily favoured Euro­pean as­sets. The In­ter­na­tional Her­ald Tri­bune (ITA) re­ports that an­a­lysts say in­sti­tu­tional in­vestors faced with losses suf­fered on US in­vest­ments are also liq­ui­dat­ing over­seas as­sets to meet the mar­gin calls. Those as­set sales add to the dol­lar’s strength, as for­eign cur­ren­cies are sold for dol­lars.

The IHT says cen­tral banks ev­ery­where have moved to an em­pha­sis on growth and away from a fo­cus on inflation. As a con­se­quence, in­vestors ex­pect more and faster in­ter­est rate cuts in Europe, bring­ing them closer to those in the US and Ja­pan, which would make in­vest­ing in short-term Euro­pean as­sets less of a draw.


Source: I-Net Bridge

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