I've been watching the groanings of the last little while, and the US economy is fully tanking. But why does the value of the US dollar continually rise? I thought that when the Fed printed more greenbacks, that would devalue the US dollar, causing it to tank. The only way that I can think of of is that perhaps other countries are devaluing their own currency so as not to lose their exports to the USA? (I got the theory listening to a administrative program on Canadian tv) Any opinions?
It's the lesser of most evils right now, I think. People are afraid the Euro is literally going to fall apart. Some of the countries that are truly cash-rich and strong are pegged to the dollar or at least tightly controlled (China, Saudi Arabia), so there's not a lot of use investing in them. Japan is also sensed as the lesser of evils, plus the carry trade is still getting unwound, so the Yen is the strongest of all. It'll be really interesting to see what happens among all the countries using the Euro.
European countries will go back to the currency they had before the euro-unification happened. Germany won't be able to keep it together. It's the job of a bear market to splinter things apart. We'll see.
I see little to no evidence of a euro weakening against anything other than the dollar or yen right now. It's at multi year highs against the aussie and pound, etc. When and if we see the euro weaken against everything, then we'll know that time is coming. Until then, this is a risk aversion - safe haven type movement, not based on EU weakness. The question to the assembled scholars (all of you) is, do you anticipate THAT happening?
IMHO, EURGPB looks to be topping out. Also, both EURCAD and EURCHF are in established downtrends. Other evidence for a Euro top would be Gisele (I know, supposedly false) and Iran calling for Euro-based oil...
USD money supply is shrinking despite fed efforts - therefore demand>supply, i.e. USD strenghtens. as banks start to lend USD will tank. it has less to do with safe heavens imo.
Financial stability - don't rock the boat. Over the long run, USD will erode more strongly - but maybe they will be able to adapt some in the future. In short - strengthening the USD is buying time to fix problems. It also creates fear, uncertainty and doubt - FUD - a well known tactic. Divide and rule - also in financial markets. Right now they are shoring up - e.g in the EURUSD with offers just above 1.36 to stem any bounce.
because they already printed too much, debt/money is being destroyed, fewer dollars in circulation means a higher value. USD is going to skyrocket; the play is and has been long USD own no assets.