Why is the dollar rising right now?
Seems like it should be dropping, no?
Answers
2786 points
Oldman answered one year ago …
It appears to others to be a "safe" haven. But It may well decline again, relative to other currencies, as the inflationary aspect of the Fed's printing money to bail out the big banks becomes evident after the drop in commodities is over. For example, the 10 yr inflation -indexed TIP bond has a current inflation factor of abou 40 % since Dec. 1998.
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4037 points
MNSL answered one year ago …
Now almost all the developed countries and emerging countries such Europe, Australia, New Zealand India etc are reducing their interest rate. They will gradually reduce their interest rate in the next 02 years.
Besides above factor commodity prices are falling rapidly all over the world now. There are not much demand for assets such as property, forest, and other assets. Generally people do not like to put money in falling assets
Especially commodity currencies will go down further and US dollar will appreciate further.
Until 2010 I do not think that we can see direction of US dollar and currency market.
Some companies will have above average returns in the next 02 quarters and beyond due to change of currency trend and commodity trend. Some countries will benefit and some countries not.
216 points
jrj90620 answered one year ago …
For the same reason houses were rising over 20% a year for a few years in California.It's a temporary mania.NO WAY will the U.S. Dollar continue to rise since the U.S. govt is bankrupt and it's going to get worse as millions of boomers retire and receive Social Security and Medicare.
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PraiseJesus answered one year ago …
US Dollar is a safe haven currency in tough times. So, investors are cashing out of emerging markets and are bringing the US $ back to US. Emerging market currencies are being sold to buy the $$. So, US dollars are in demand. Due to this demand US $ is stregthening.
Also, Europe has too many problems and Euro does not have political backing but US Dollar does. Euro members Italy and Spain do not get along with France and Germnay. Italy and Spain have been experiencing real estate problems for the last two years and putting pressure on ECB to reduce interest rates but ECB did not budge. However, when banking problems hit home in Swiss, France and Germany, Mr. Trichet agreed to reduce interest rates. I would not be surprised if Euro collapses in the next two years. This will certainly drive the US $ up.
Though Fed is printing too much money, current fed chairman does KNOW what he is doing! Banks are being deleveraged from 30:1 to 10:1 (may be). This will mop up the extra US $$ in the system. Credit is going to be tight in the near future. So, I would not be surprised if US $ raises for the next five years (may be the next decade even!).
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Venkat
