Why fear is good for the dollar – MoneyWeek

Fearisproppingupthedollar

Butforanother,whereelseareinvestorsgoingtorunto?

Asfearhasrapidlyregainedtheupperhandinthemarkets,amidconcernsaboutwhethertheTARPwillgothrough,andmoreimportantly,whetheritwillworkevenifitdoesgetpassed,thedollarsslidehasbeenarrested。

Therealityisthatregardlessofhowcredit-worthytheUSactuallyis,itisstillseenasoneoftheultimatesafehavensintroubledtimes。

Thatmaychange,butforaslongasinvestorsarestillinflightfromriskmode,theUShasapowerfulforceproppingupitscurrency–sheerterror。

Thealternativessimplycantgeneratethesamelevelsofconfidenceininvestors。

Theeuroisprobablythemostobviouscandidateforreservecurrencyafterthedollar,butEuropehasitsownproblems。

TheEuropeanCentralBank(ECB)certainlyactstoughandprobablyhasthemostintactinflation-fightingcredentialsofanycentralbank。

YetwiththelikesofSpain,IrelandandItalyintrouble,thethreatofamajorstructuralcollapseishangingovertheeuro。

Imnotsayingitwillhappen。

Andiftheeurosurvivesthisglobalslumprelativelyintact,thenitlllooklikeaseriouscontender。

Buttheressomedistancetogobeforethathappens。

Asforothercurrencies,mostAsianplayersstillwanttheircurrenciestoremainweakagainstthedollar;theUKisarguablyinevenmoretroublethantheUS;andAustraliaisalsoheadingforaslowdown。

Inshort,aslongasfearreignsinthemarkets,thedollarmaybeweakened,butitslikelytoclingtoreservecurrencystatus。

ItwontbeuntilothercountriesgenuinelyfeelabletothriveinaworldwheretheUSisntdrivingtheglobaleconomy,thatseriousalternativestothedollarwillarise。

Soironicallyenough,itmightnotbetherecessionanddepressionthatkillsthedollar,buttherecovery。

Wellhavemoreonwhatthefutureholdsfortheglobaleconomy,followingthelatestturmoil,inthisweeksissueofMoneyWeek,outonFriday。

Andbeforewego,justaquicknoteonETFSecurities–anyonewhoholdsanyoftheexchange-tradedcommodities(ETCs)whichwereaffectedbylastweeksturmoilwithAIG,willprobablyalreadyknowthattradinghasrestartedinalloftheaffectedproductsnow。

Wellhavemoreonthis,andETFsingeneral,inFridaysissuetoo。

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getyourfirstthreeissuesfreehere。

Also,werehostingawebchatonemergingmarketstomorrowat13:00,withMichaelKonstantinovofAllianzGlobalInvestorsandMarkDampierofHargreavesLansdown。