Posted By: Jeff Cox
08 Dec 2009
The US dollar’s long decline may finally be coming to an end.
More investors—nervous about the global economic recovery and skeptical about how much further stocks can rise—are beginning to turn to the dollar as a safe haven. That has boosted the dollar’s value in recent days and led to speculation that the rebound may continue, regardless of what the Federal Reserve does with interest rates.
Ironically, the shift in sentiment was triggered partly by Friday’s better-than-expected employment report, which served a dual purpose: it reinforced the notion that the job market is still tight but raised fears that the Fed could start raising interest rates again.
The rising dollar has sent both stocks and commodities lower. And analysts see stronger signs that investors are moving away from those more risky investments and into the safety of the dollar and US Treasurys.
"There is this market focus slowly shifting potentially to see more risk down the road, and markets are getting thinner towards year’s end," says Bryan Rich, currency analyst for Money and Markets and a dollar bull. "For markets in general this whole risk trade has been so highly correlated that when you get a pullback that tends to affect everything."
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