Latest Euro Zone and US Economy Fundamentals

By mosesbet · Filed Under Market News Comments Off on Latest Euro Zone and US Economy Fundamentals 

Dire predictions for the dollar have not yet ceased to make the rounds. Investors are still moving away from currency and into safe haven investments. But is the dollar really destined for doom? The fact is, the dollar is still holding up quite well, seemingly against all odds, when compared with other major currencies in the world. In spring, the U.S. Dollar index was at 72.50, but now it stands at 77.10, showing that the dollar has actually made some headway relative to the basket of currencies the index measures it against.

The Collapse of the Dollar- Myth or Fact?

Financial analysts have been predicting the collapse of the dollar for several months now. The fact remains that the dollar index has tumbled 20% since late 2009 and this prompted a massive injection of stimulus currency into the market. The dip led to predictions that the currency would devalue immensely leading to the demise of the dollar as we know it. However, that has not happened yet.

One reason for this could be that the effects of the stimulus were subdued because of the recent massive devaluation of wealth that was based on this currency. Analysts are venturing out with their belief that the two forces may have offset each other leaving the dollar teetering but not falling as yet. For the dollar, devaluation may have actually been a good thing if this is true.

The Euro Has its Own Problems

Another reason for the dollar’s resilience is that no matter how widely used the Euro may be, it has not managed to displace the dollar as world currency. The Euro may be considered the ‘alternate dollar’ by whole economies but the debt crisis in Greece, Portugal, Spain and Italy has undermined its strength. Institutional investors, in particular, are hesitant to complete the move from Dollar to Euro in light of these uncertainties.

The Resilience of the U.S. Economy

The U.S. economy has proven time and again that it is remarkably resilient. Large budget deficit, slow economic growth, lack of political stability and so many other issues not withstanding, the confidence in its ability to rise phoenix-like still remains. Given these, the long term outlook for the dollar remains positive especially when compared with the Euro.

 

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