Wednesday, March 4, 2009
One theory on why the Dollar has remained resilliant.
The BIS said European and British banks have relied on an “unstable” source of funding, borrowing in their local currencies to finance “long positions in US dollars”. Much of this has to be rolled over in short-term debt markets. The currency mismatch has become a potential risk for banks as the dollar continues to climb against the euro and Swiss franc, and especially sterling and Sweden’s krona.