[lbo-talk] Why is the U.S. dollar regarded as a safe haven.

[Marvin Gandall]

> Bob Morris wrote:
>
>  The U.S. economy is in very bad shape and the debt is ballooning. Why buy
> the U.S. dollar?
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The dollar has been rising partly as a result of safe haven buying, but
mainly because of demand for USD's by foreign companies which transact
business in the currency and by foreign borrowers who need to service their
US-denominated debt. The banks are hoarding, so the central banks have to
supply loan guarantees and dollars from their forex reserves and swap lines
with the Fed. The more the dollar appreciates against their own currencies,
the greater the demand for USD's by foreign businesses and debtors in Europe
and the emerging markets, driving the dollar up further. Look for concerted
action soon to halt the dollar's rise which is wreaking havoc on foreign
economies and further contributing to the collapse of US exports.