Last week, when French bank BNP Paribas froze three security funds that invest in U.S. subprime mortgages, it prevented people from getting their money out. This indicated a shortage of dollars in the world, reports Ashley Milne-Tyte in a Marketplace segment for American Public Media. Now the dollar is getting a boost as BNP Paribas and other European banks scramble to buy dollars to pay back loans used to purchase that debt. This is wonderful news for the dollar that has been at historic lows against the pound and euro for the last few weeks. Will the iPath EUR/USD Exchange Rate ETN (ERO) be affected by the recent events?
Some experts see the dollar’s gain as temporary. Investors are buying the U.S. dollar only to pay back loans, not because they like what’s happening in the U.S. This could mean the dollar will decline again when the subprime mess is over.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.