Russia- Georgia conflict gives dollar a boost
Monday, 18 August 2008
LONDON, Aug 17 (Reuters): The conflict between Russia and Georgia is giving the dollar an old-fashioned boost, based on US stability and military if not economic might.
Armed conflict between Russia and its former and vastly outmatched Soviet neighbour Georgia over South Ossetia has re-awakened investors' awareness of the safe-haven value of the US.
And while few are predicting a return to Cold War-style tension, this flight to safety no doubt gave a boost to the dollar's rally last week as Russian troops rolled through South Ossetia. The dollar has enjoyed a sustained and sharp rally since a July slump prompted by concern over mortgage giants Fannie Mae and Freddie Mac, rising by as much as six percent against a basket of currencies .DXY.
That recovery was primarily driven by a realisation that the rest of the world, Europe specifically, was joining the United States in the economic doldrums.
The sight of Russian forces in action -- despite the inevitable and fruitless Western objections -- makes holding the currency of a country whose financial system is shaky but which is not currently shelling its neighbours that much more palatable.
Armed conflict between Russia and its former and vastly outmatched Soviet neighbour Georgia over South Ossetia has re-awakened investors' awareness of the safe-haven value of the US.
And while few are predicting a return to Cold War-style tension, this flight to safety no doubt gave a boost to the dollar's rally last week as Russian troops rolled through South Ossetia. The dollar has enjoyed a sustained and sharp rally since a July slump prompted by concern over mortgage giants Fannie Mae and Freddie Mac, rising by as much as six percent against a basket of currencies .DXY.
That recovery was primarily driven by a realisation that the rest of the world, Europe specifically, was joining the United States in the economic doldrums.
The sight of Russian forces in action -- despite the inevitable and fruitless Western objections -- makes holding the currency of a country whose financial system is shaky but which is not currently shelling its neighbours that much more palatable.