bank run blog

It’s hard to believe that anyone sees the US dollar as a “safe haven” anymore, but that is what has been happening as commodities continue to fall and the markets remain inscrutably volatile. Add soft data from America’s main trading partners, and it looks like a short-term dollar rally. The Associated Press is reporting Fears of global slowdown buck up the dollar :

“The dollar climbed to eight-week highs against the euro and seven-month highs against the yen as fears of a global slowdown helped the dollar continue its rally.”

Ironically, the exportation of financial turmoil tends to strengthen the US currency :

“The dollar gained as gloomy economic signs came in from abroad.

The Japanese government said a monthly index of business conditions was worsening, setting off the yen decline, said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon Corp.

Meanwhile, the German government said industrial orders dropped unexpectedly in June, with orders from elsewhere in Europe leading a decline that underlined pessimism about the outlook for the continent’s biggest economy. Orders dropped 2.9 percent in June, following a 1.4 percent drop in May, the Economy Ministry said.”

In covering the same topic– the dollar’s apparent strength– the Wall Street Journal was able to locate a dissenting view :

“The dollar was surging even before oil prices began to go lower Wednesday, following the release of German economic data. Manufacturing orders in Germany fell for the seventh consecutive month, leading analysts to predict a dire future for that country’s economy.

‘The dollar is gaining by default,’ said Michael Klawitter, currency analyst at Dresdner Kleinwort in Frankfurt. ‘What is happening is not really dollar strength, but rather other currencies are weakening significantly.’”

Associated Press : Fears of global slowdown buck up the dollar

Wall Street Journal : Dollar Rallies on Oil, European Data