The Dollar - Unsafe Haven
Just like any market price, the exchange rate for the dollar fluctuates based on supply and demand. By observing the constituent elements of the supply and demand for dollar assets, we can thus explain the significant appreciation of the dollar during the second half of 2008. Over this period, during which the crisis spread to the whole of the global economy, US Treasury bonds acted as a safe haven, but in net terms foreign investors ceased buying US private securities. Americans, on the other hand, repatriated capital on a massive scale, driving up the net demand for dollars. Supply of dollar assets fell more rapidly than the global supply of assets and thus shored up the US currency. The dollar’s future movements remain one of the greatest uncertainties following the crisis, even though the forecast made before the beginning of the crisis remains valid: if the ongoing US deficit is to be resorbed, a weak dollar will continue to be required.
Volume (Year): (2009)
Issue (Month): 289 ()
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