The Buck Stops Here
Since the beginning of the year, only one thing mattered to the U.S. dollar: the market's appetite for risk. When investors were nervous, they sought refuge in the greenback regardless of how poorly the U.S. economy was doing, and when they were optimistic, they moved their money out of a currency that yielded next to nothing into riskier, higher-yielding opportunities.
Considering that Europe's debt crisis haunted us for the better part of this year, buying U.S. dollars has been one of the most lucrative and clear-cut trades. Between January and May, the dollar appreciated more than 3% against currencies such as the euro, Japanese yen and Australian dollar. While 3% may not seem to be a lot, from the low point of the U.S. dollar's exchange rate against the euro in March to its high point at the end of May, the greenback rose close to 9%, which is a huge move, particularly for a two-month period. During this time, the only thing investors wanted was safety and the U.S. Treasury market -- by extension, the U.S. dollar provided that. The tide started to shift however in June as investors hoped that Europe's leaders would finally get their act together and come up with a plan to end the crisis. This optimism made shorting dollars one of last month's best trades....333 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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