Is The Dollar Re-asserting Itself As The Currency Of Choice?

March 3, 2009

US (ChattahBox) – A report by CNN makes an interesting observation: that most other countries believe it will be the US that comes out of the recession first, and the rest of world is betting on it.

Slammed over the last several years as U.S. government budget and trade deficits mounted, the greenback was seen ceding its status as the predominant currency to the euro.  And while it took a hit between 2005 and 2008, the dollar seems to be making a comeback, with percentage raises from between 7% and 10% against the leading world currencies, including the euro, yen, and pound.  The global financial crisis has rocked markets worldwide and investors are voting with their cash and buying U.S. dollars, indicating that reports of the greenback’s death as a reserve currency have been greatly exaggerated.

“The U.S. was one of the first nations to respond to the weakness with aggressive monetary policy measures. So it could be one of the first countries out while Japan and Europe might be the last ones out,” GFT currency research Kathy Lien told CNN.

It is strangely reassuring news amidst mass layoffs, and a serious drop in stocks that has left Wall Street in a panic. But that doesn’t mean the worst is over, or that the future is guaranteed to be bright.

“Investors are focusing on a prolonged downturn in the U.S. economy and the ramifications for the rest of the world. If the U.S. doesn’t recover soon, nobody else will recover,” Lein continued, citing Europe’s serious problems, which include mass inflation and a dwindling welfare system, as possible reason that the dollar has been gaining strength.

Luckily, the world has not turned their back on the U.S, yet. Capital continues to flock to the US because while things may be bad here, they are expected to get much worse overseas.

“The global investor still thinks the U.S. can pay off their debts — no matter how big they are at the moment,” Jacob Oubina of Forex.com says.


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