The U.S. Dollar – Liquidity Crisis Continues

Investors continue to be concerned about the extent of the liquidity crisis and whether more financial institutions will fall victim to the credit crunch.  Consequently, investors are beginning to move into safe haven currencies such as the Yen and the Swiss Franc, resulting in the U.S. 3-Month Treasury rates falling to 55 basis points.  On Friday, the U.S. 3-Month Treasury rate was as high as 1.20%, but the demise of Bear Stearns triggered the fall to its lowest level in more than 50 years.

 

On

Thursday, March 20, 2008, the U.S. Dollar closed at 98.90 yen compared to Wednesday’s high of 100.44 yen.  It also fell below 1.000 Swiss Francs.  However, the U.S. Dollar gained on the Euro and closed at $1.5584 compared to Wednesday’s close of $1.5608.

 

According to analysts the rapid fall in certain commodity prices is cushioning the fall of the U.S. dollar.  Gold prices fell to $921 an ounce from its high of $1,012 an ounce.  Oil, wheat, and base metal prices tumbled.  It has been rumored that some Asian Central Banks, in their attempt to realign their foreign exchange portfolios, have been selling the U.S. Dollar.