Crises like those in Japan and the Middle East shouldn't be any threat to the dollar, according to a new analysis of the situation.
You might think that an earthquake, a tsunami, and a nuclear disaster would lead a government to pull in its horns, sell some foreign bond holdings, and start rebuilding. You might also think that the Chinese at some point would look for higher-yielding low-risk havens for their foreign-exchange reserves. But you would be wrong, according to this analysis.
The Japanese have little reason to sell Treasuries if they want the yen to weaken, and China "has no other viable options for investing the foreign exchange reserves that it is forced to accumulate because of the Yuan-Dollar peg."
The dollar just hit a 15-month low against a basket of currencies. But if this analysis is correct, that slump may not last.
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