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February 27th 2009

Dollar Retains Safe Haven Status

The ForexBlog recently reported that investors were cautiously wading back into emerging market currencies. In hindsight, it looks like this report was delivered prematurely, as this week marked a return to the notion of the Dollar as save haven currency, having displaced even the Japanese Yen. While President Obama did his best to assure taxpayers and investors that the economic stimulus would bring the economy out of its slump, the markets were unconvinced. Economic data, especially as it pertains to the housing market, has become increasingly grim, and even Chairman Bernanke of the Federal Reserve conceded that a recovery is unlikely before 2010. Given that the government will have to issue a tremendous quantity of Treasury Bonds in order to fund its ambitious spending plans, however, it’s possible that foreign investors will soon lose their appetite for low-yielding American securities. Reuters reports:

Any optimism that the global economy could be recovering, however, should prompt investors to sell the dollar and buy riskier assets and currencies.”When panic and risk aversion abate, money will start flowing into other regions such as Europe,” said a portfolio manager.

Read More: Dollar gains broadly as safe-haven demand rises

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Posted by Adam Kritzer | in US Dollar | 2 Comments »

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2 Comments of “Dollar Retains Safe Haven Status”

  1. FreedFX Says:

    Last week, market quite slow. Have to wait 2010 it really along time to go there… hope can make some money this coming week

  2. Yohay Says:

    It’s ironic that the US, that brought the world into recession has it’s currency hailed as a “safe haven” currency…

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