We’ve taken a long-term dollar bullish view. But even We have been surprised by the greenback’s persistent strength.
The dollar’s historic move is showing that it has the upper-hand in what’s become a nasty currency beat-down. And the deleveraging that’s taking place in emerging markets is fueling the drive. Also helping out is significant repatriation of funds to the U.S., a risk-averse environment.
The downturn overseas and rush to the exit, evidenced in global stock markets’ decline, is simply creating demand for dollars.
Specifically, I’m looking for this skirting money flow and overexposure to emerging market debt to further weigh down the euro and the British pound for the next several months.
We’re seeing proof that the dollar is nowhere near forfeiting its position as global reserve currency. After all, the credit and economic crisis isn’t sending money to Europe for safety.
So whoever thought the euro was ready to fulfill the role of world reserve currency can think again.
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