Credit Squeeze's One Winner: The Dollar

Worldwide scramble for greenbacks reverses currency's slide
By Heather McPherson,  Newser User
Posted Aug 16, 2007 12:59 PM CDT
A money changer employee changes Euro and US Dollars on an exchange kiosk, in downtown Milan, Italy, July 5, 2005. The euro soared to a new high against the U.S. dollar on Tuesday July 10, 2007, reaching...   (Associated Press)
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(Newser) – After years of decline, the American dollar has reasserted itself in the face of the worldwide credit crunch. The dollar has rallied against the euro and the pound as banks and investors drop hazardous financial instruments and hold cash, Bloomberg reports, making the implication clear: For all its woes, the dollar remains the world's unrivaled reserve currency.

The dollar hit a seven-week high against the euro yesterday, and the climb is likely to continue; UBS has predicted that the euro will slip to $1.32 in the next three months. Banks paying back dollar-denominated mortgage securities are now finding themselves in competition with investment firms buying greenbacks in hopes of a further rise.