Dollar Faces ‘Crosswinds’ as Risk Appetite Returns, BIS Says

The dollar faces “crosswinds” as rising stocks stoke demand for higher-yielding assets, reducing the allure of the U.S. currency as a haven, according to the Bank for International Settlements.

“Safe-haven flows that favored the dollar have been reversing,” the Basel, Switzerland-based BIS said in its quarterly report today. “When equities fall, risk appetite shrinks and volatility is increasing, dollars are bought by both type of investors, as in 2008. With risk on, equity prices rising and declining volatility, dollars are sold.”

The dollar declined against its 16 most-actively traded counterparts this year, losing 25 percent against the Brazilian real and 23 percent compared with the Australian dollar, as the MSCI World Index of stocks gained 27 percent amid investor confidence the global economic recovery is accelerating.

Read Full Article from Bloomberg

- Posted: 2009-12-06 21:43:07

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