US Dollar Comeback

US dollar makes comeback, 'bucking' world downturn
Amid wreckage of the US financial system, the battered buck makes surprise comeback

October 29, 2008: 06:24 PM EST

The stock market is in shambles, credit markets are squeezed and corporate earnings are cratering. But one piece of the mangled U.S. economy is making an improbable comeback: The once-almighty dollar.

As the financial meltdown clobbers world economies from South America to Asia, investors desperate for safe assets are plowing money into the battered buck _ helping it snap a six-year slide and reclaim its long-held status as a stable asset during rough times.

"The dollar has become the safe-haven play," said Kathy Lien, director of currency research at Global Forex Trading in New York. "It's a pretty monumental move we're seeing."

Trouble is, a resurrected greenback may not be a good thing.

While a stronger dollar makes vacations overseas and commodities like oil cheaper for Americans, it also makes U.S. exports more expensive. That could deepen the U.S. downturn by hurting companies from Boeing Co. to Caterpillar Inc. and Coca-Cola Co. that get an increasingly big chunk of their earnings from overseas.

Still, the dollar's recovery is stunning for a currency that until recently was considered the dog among its main rivals. After reigning supreme as the world's dominant reserve currency for decades, the dollar began a steep decline in 2002, buckling under the weight of costly wars in Iraq and Afghanistan and an economy with an $800 billion annual trade deficit.

Falling U.S. interest rates this year sped up the dollar's decline until it took $1.60 to buy one euro at one point this summer. Shortly after the euro was introduced in January 2002, it took only 88 cents to buy one euro.

Now, suddenly, the buck looks safe by comparison. to read the full story, please follow this link:

Courtesy: UK Currency News | money.cnn.com | NEW YORK (Associated Press)