After Francs Comes Dollar: Greenback Might Skyrocket Soon

 

After the Swiss National Bank (SNB) has undermined global confidence in regulators, any sudden action by the US Fed might trigger a feverish buyout of the dollar, pushing its FX rate sky-high, demolishing the entire architecture of international trade in goods and services.

MOSCOW, January 21 (Sputnik), Kristian Rouz — The recent shock to the currencies markets, having come from Switzerland on 15 January, when the franc appreciated by 23% in a single-day trading session, has badly damaged the international financial stability, with capital leaving the Eurozone and investors feverishly buying out gold and US bonds. Such a dramatic change in FX rate of one of the global reserve currencies has triggered major debt risks worldwide, from Eastern European mortgages to Russia’s burden of excessive corporate debt. Now, across the Atlantic, the robust economic growth and market optimism in the US have spurred the anticipation of the Federal Reserve’s interest rate hike, inevitably triggering the dollar to strengthen.

Developing World: Euro Loses Attraction as Reserve Currency

Countries in the developing world are drastically reducing their euro holdings as economic instability in Europe leads them elsewhere to stock their currency reserves. Euro holdings are at their lowest level in a decade, according to the International Monetary Fund.

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That is the message to be gleaned from the latest installment of the regular International Monetary Fund report on currency reserves held by countries around the world. According to the report, developing economies shed some $45 billion worth of euros in 2012 and have sold close to $90 billion worth of euros since the second quarter of 2011.