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Experts believe the dollar is poised to appreciate

03 March 2009 11:16 (UTC +04:00)

Experts think the strong dollar is a sign of belief that the US economy and financial markets recovery will happen sooner that other economies.
Some think the dollar looked relatively less risky than other major currencies as U.S. authorities were seen to be taking swift action to overcome the crisis in the financial system.
Traders said the euro came under pressure after European leaders rejected a mass bailout of central and eastern European countries on Sunday, clouding the outlook for the euro zone, already hit hard by the fast-deteriorating east European economies.
The dollar rose to its highest in three years against a basket of currencies, adding to gains made late last week on safe-haven buying after the U.S. government said it would raise its equity stake in Citigroup and data showed the U.S. economy had its deepest contraction since 1982.
At the same timer, worries about the depth of the global downturn, spurred by more bad news about major financial institutions, fed further safe-haven buying of the greenback.
As to the recent trends, the dollar index, which measures the currency against a trade-weighted basket of six global counterparts, rose to 88.950, from 88.166 late Friday. The index posted a gain of 2.2% in February.
After Citi deal, there were news about the probability of state takeover of other large banks (Bank of America, Wells Fargo, JP Morgan), a move which is viewed as better than lack of control.
However, optimistic approach to the US economy and market prevails over the negative now.