It is the question more of this tightening global liquidity and the way emerging economies borrowed. They borrowed in dollars and so there is a lot of demand for dollars to pay the interest on the dollar debts.
Number two, when you look at international investors, they have some cash and they have some bonds. If you look at what they do in terms of money in cash and in bonds, they can buy US treasuries. The 10-years now are available at an yield of 3% but they could also buy in Europe treasuries but the yield would be much lower.
For example, in Germany they would get a yield of 0.5% on German governments. In Portugal, they would get 2.2%, in Spain 1.66%. The dollar compared to this European currencies and bonds is relatively attractive in terms of a yield. It is not particularly attractive as a currency because some emerging economies have a much better financial condition today than they had in the last crisis or in ‘97-98.
If you ask me what I think about India, last time I said the currency has become a bit oversold and may rally a little bit, maybe to 71-72 against the US dollar. But I think the long-term trend of the Indian rupee is down...
- Source, Economic Times
