Why is the dollar not depreciating?

- "The trend in the dollar against emerging countries' currencies as well as the euro may seem surprising."
- "First, the outlook for the US economy has actually worsened significantly since the start of 2010: anaemic household demand, ongoing deleveraging, useless corporate profitability, deterioration in the labour market situation and in household solvency, still high external deficit and unbalanced public finances."
- "Second, some central banks (the People’s Bank of China in particular) have admitted that they are increasing the weight of the euro and the yen in their foreign exchange reserves to the detriment of the dollar. So why is the dollar so resilient? The possible explanations are:
• the dollar's role as a safe-haven currency when risk aversion increases, since the summer of 2008;• concerns also about the economic situation of the euro zone and emerging countries;• the perception that the valuation of emerging assets is too high;• the very sharp earnings growth among US listed companies."
- "We confirm the roles of risk aversion, concerns about the situation of the euro zone and the return of non-resident buyers of US equities."

Natixis Flash Economics 437 20100903

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