On Oct 25, 2008, at 12:54 PM, Marvin Gandall wrote:
> 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.
Hedge funds are also unwinding their positions in foreign currencies, and buying dollars. They're also buying yen to pay back loans taken out because yen interest rates were low (and still are) and the proceeds were invested in higher-yielding instruments in other currencies ("the carry trade"). Those trades are being unwound, pushing up the yen and driving down high-yield currencies.
Doug