Even with the current financial crisis where every country is facing economic hardship, the U.S. dollar is strengthened day by day. Why is it?
The main reasons that influences the strength of the dollar. First, a fear factor has been increasing the demand for the dollar. With the current financial crisis, the investors are buying buying safe asset, the U.S. dollar instead of foreign currencies that are risky. Due to the increasing demand the price for the dollar increases relative to other currencies. In addition to this, there has been concern regarding other emerging market currencies like yuan and euro. These two currencies has been strengthening over the years. However, the investors feel that the bubble may burst for these currencies, conversely benefiting the dollar.
This trend is expected to continue as the as the global economy would continue to face hardship.
1 comment:
Actually, we've just discussed a little bit about the appreciation of the dollar recently. Some people have suggested that the main reason for this phenomenon has nothing to do with what is happening in the US or whether US assets becomes more attractive, but it's due to the reevaluation of the euro. I havent' found sources to back this theory up though.
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