why is the dollar growing stronger when the US economy is going weaker?

[bingusa]

Now Euro/USD exchange is coming down to 1 Euro = $1.3298.

I am curious since US financial market started the flu. TIA.

 

[maxnharry]

The US started the Flu, but many foreign central banks took on alot of the sub-prime debt. My un-expert opinion is that people believe the dollar is better able to weather the storm.

 

[globetrotter]

Originally Posted by maxnharry

The US started the Flu, but many foreign central banks took on alot of the sub-prime debt. My un-expert opinion is that people believe the dollar is better able to weather the storm.

that is my feeling - for the past few years people having been buying dollars to buy american goods, but if they want to park their money in a currency for securities sake, it wil be in dollars. so demand is up.

 

[Star]

Recent changes in Interest rate differentials is one reason. Many countries are dropping their interest rates makeing the differential gap between rates in the US and other countries narrow. If you have a particular view on the risk profile of a country and suddenly you are not getting as much interest, you might decide to sell out of the foreign currency and go back to US dollars. This is called carry trades and Japanese housewives are said to be big players in borrowing in one currency to buy in another and then invest in the other countries interest baring deposit accounts. Their is a relationship between the value of two currencies and their countries official interest rates.

The other reason is that some countries are commodities centric like Australia. If you believe we are headed for a global recession then the next assumption will be demand for commodities by producers like China and Japan will drop as demand for finnished goods such as cars, tv's and etc also drop. This then alters your view of a country like Australia and the demand for its currency so you decide to sell out your Australian dollar positions. The Australian dollar in the last week has plummeted 13c against the US! (It was almost on par 3 months ago now its worth 64 US cents)

Then there are just big time speculators who hedge their bets that a currency will go one way or another.

All basically comes down to people s perceptions of risk and returns and yes the US dollar is still the dominant global currency regardless of what some people like to say about the Euro.

 

[Joffrey]

Dollar is up while economy is sinking because other economies are sinking as well, this is driving panicked investors to buy US currency. Basically it means people think the US is better able to manage the turmoil than other markets.

 

[bingusa]

We will see if USD can hold still with all the definicit and the bail out $$$

1 U.S. dollar = 6.83452254 Chinese yuan

So I guess the bet is China's economy will hold on for awhile.

 

[v0rtex]

Originally Posted by bingusa

Now Euro/USD exchange is coming down to 1 Euro = $1.3298.

The dollar's not getting stronger, other currencies are just weakening at a faster rate.

 

[Kevin]

So should I move my savings from USD to New Zealand Dollars, hoping to reap a profit as the currency rebounds?

Right now interest rates here are at eight percent, and the NZD is at a 52-week low on the USD ($0.59 NZD = $1 USD).

 

[bingusa]

National Debt Clock draws worried glances, reactions.

 

[eg1]

US investors are selling foreign assets hard and repatriating USD

 

[Matt]

Originally Posted by Kevin

So should I move my savings from USD to New Zealand Dollars, hoping to reap a profit as the currency rebounds?

Right now interest rates here are at eight percent, and the NZD is at a 52-week low on the USD ($0.59 NZD = $1 USD).
a mate of mine in Singapore reports that the currency dudes there are all out of Aussie dollars with people doing exactly this.