NEW YORK — 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 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 such as oil cheaper for Americans, it also makes U.S. exports more expensive. That could deepen the U.S. downturn by hurting companies from Boeing to Caterpillar and Coca-Cola that get an increasingly big chunk of their earnings from overseas.
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 over the summer. The 15-nation euro this week fell to its lowest level against the dollar since April 2006, while the British pound at one point last week lost a staggering 8 cents against the dollar.
The stampede into the greenback reflects a “crisis of confidence,” Lien said.
“What everyone is beginning to realize is that, yes, the U.S. is in trouble. But it’s also much further along (in the crisis) and probably closer to stabilizing than Europe and other regions,” Lien said.
