Quote:
Originally Posted by Shaze
i still don't understand why the hell the USD is going strong with the financial crisis in the US. is it that bad also in other parts of the world??? Euro/USD is about to hit a 52-week low if the trends continue. are we going to see 1 for 1 ??
i actually think the USD should be tanking.
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I'm not an investment banker or anything, but this is the way I understand it in very, very basic terms:
There are investors out there (lots of them) with so much money that they can't physically house their money if they were to try to pull out of investing. They can't stuff a billion dollars in a mattress, so to speak. These investors have their money in the market and it has to stay there.
With banks tanking and going out of business, these investors are so afraid of corporate investments that they'll put their money into US bonds with a promise of very little or no return, thereby effectively loaning America their investment money for free. They kind of see US Bonds as the equivalent of stuffing their billions in a mattress, so they're willing to do this just to keep what they have for now. People wanting to invest in these bonds makes the USD stronger. So the USD is actually stronger in a financial crisis where investment alternatives look like terrifying money pits.