In the wake of the collapse of Lehman Brothers, the U.S. dollar saw widespread declines as the Federal Reserve was forced to slash interest rates to eventually zero. Since then there has been growing speculation that the greenback may not hold on to its status as the world’s reserve currency and faces more declines.
Near-Term Outlook Remains Grim
“Near-term it does look pretty tough for the dollar … rates being so low in the US in response to the crisis, that really hurts the dollar, which is used to having a least some yield premium over the Japanese yen for instance,” Sean Callow, senior currency strategist at Westpac Bank, told CNBC.
“A pretty grim picture until we get a lot better news on the economy and at this stage it doesn’t seem time yet,” Callow added.
Will There Be a Dollar Crisis?
“Over the long term you expect the US dollar will remain relatively weak,” Jim Vrondas, manager of corporate business at OzForex, told CNBC.
“It’s going to take a long time to unwind these massive deficits that they’ve got going on at the moment and in that kind of environment it’s only naturally that people become a little bit hesitant of holding dollar reserves,” he said.
Recovery Still A Few Years Away
John Licata, chief investment strategist at Blue Phoenix, says that while the progress over the last 12 months had not been as dramatic as expected, the financial crisis has increased investor awareness.
Greed Has Returned
The lessons of the past year have been forgotten and risk appetite has returned dramatically on Wall Street, says Richard Bove, financial strategist at Rochdale Securities.
US has Not Learned from Crisis
The U.S. has not learnt anything and without dealing with the economy's core structural problems, the malaise will continue, says Damon Vickers, CIO at Nine Points Capital Partners.
Credit Crisis is Receding: Analyst
The credit crisis is receding, notes Sean Fenton, portfolio manager at Tribeca Investment Partners. He offers his take on how markets will fare going forward.