A flight to the dollar? Amid the United States' worst financial crisis in more than 20 years, perhaps since The Great Depression of the 1930s? It seems almost paradoxical, but that's the reality. So far. Stay tuned, an economist says.
The dollar has lost ground versus the world's other major currencies, amid this latest round of write-offs, bankruptcies and mortgage-asset-related stress on Wall Street, but the greenback has not plunged. In fact, the dollar is off its lows registered early Monday.
In early Tuesday trading, the dollar rose about a half-cent versus the euro to $1.4198, 1.5 cents versus the British pound to $1.7854, and a half-cent versus the Swiss franc to $1.1101. However, the dollar fell about 1 yen to 103.68 versus Japan's yen.
Themes: flight to quality, de-leveraging
Economist David H. Wang told BloggingStocks Tuesday the dollar's recent track displays two tendencies: a flight to quality and an unwinding of the carry trade -- i.e. a global de-leveraging.
"Although the U.S. Government and taxpayers are likely to spend more to deal with this financial crisis, and that implies more dollars in supply and inflation, institutional investors fear a decline or collapse in stock markets around the world, and are piling into the dollar," Wang said. "That is offsetting the dollar-weakening-effect of more U.S. Government spending. Essentially, it is flight to quality, so far."
The dollar has lost ground versus the world's other major currencies, amid this latest round of write-offs, bankruptcies and mortgage-asset-related stress on Wall Street, but the greenback has not plunged. In fact, the dollar is off its lows registered early Monday.
In early Tuesday trading, the dollar rose about a half-cent versus the euro to $1.4198, 1.5 cents versus the British pound to $1.7854, and a half-cent versus the Swiss franc to $1.1101. However, the dollar fell about 1 yen to 103.68 versus Japan's yen.
Themes: flight to quality, de-leveraging
Economist David H. Wang told BloggingStocks Tuesday the dollar's recent track displays two tendencies: a flight to quality and an unwinding of the carry trade -- i.e. a global de-leveraging.
"Although the U.S. Government and taxpayers are likely to spend more to deal with this financial crisis, and that implies more dollars in supply and inflation, institutional investors fear a decline or collapse in stock markets around the world, and are piling into the dollar," Wang said. "That is offsetting the dollar-weakening-effect of more U.S. Government spending. Essentially, it is flight to quality, so far."
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