Dec. 28, 2011, 3:53 p.m. EST
Look for 2012 to be the year of the dollar
Commentary: Currency wars favor the greenback
By David Callaway, MarketWatch
SAN FRANCISCO (MarketWatch) — At a meeting in London last month I listened with mild amusement as a senior sales executive discussed the rollout of a banking campaign to promote the rise of China’s renminbi as a global currency.
It’s certainly just coincidence that the U.S. Dollar Index (NYE:DXY) is up more than 4% since that meeting, while the China story line has degenerated into a series of ominous collapse scenarios for 2012, much like the Europe and emerging-markets stories.
Indeed, if the crises of the past several months have taught us anything, it’s that despite the allure of a new Asian currency champion, despite the potential for the European project to be saved, despite the weakness of the dollar and the gains in gold over the last decade, when large institutional investors truly get scared, they buy U.S. dollars.
They buy dollars when European banks look weak. They buy them when U.S. banks look weak. They even buy them when the U.S. loses its triple-A credit rating at Standard & Poor’s, because, after all, what else are they going to buy? The dollar index is up more than 6% since that early-August rating reduction, which provoked such anxiety at the time