"We continue to recommend the PowerShares DB U.S. $ Index (NYSE: UUP)," says Jack Crooks. In World Currency Alert he explains why the US dollar will stay the world's main currency.
"Global capital is seeking safety. This is not a short-term phenomenon. Instead, it’s a cycle that’s just beginning — and I think it will be with us for years to come.
"For now, the least ugly continues to be the U.S. dollar as a result of continued demand for U.S. Treasuries and the desire to be aligned with global leadership.
"It’s a global recession and it will be a global recovery. The overwhelming message now from the G-20 is coordination. World economies are so interconnected, neither prosperity nor pain is felt in isolation.
"So at the moment, there is general agreement to act in a concerted effort to jumpstart advanced economies and to reach out to emerging market economies.
"This bodes well for the U.S. dollar. Until there are clear signs that one economy is handling recovery better than another, the U.S. dollar will continue to benefit as a safe-parking place for capital.
"Meanwhile, the Chinese are campaigning for a replacement of the U.S. dollar as the world’s reserve currency. In this case, it’s mostly posturing by China to elevate its status globally by weakening the position of the United States.
"My analysis continues to point to vulnerabilities in the global economy, and in the pecking order of global economic leadership, the United States still sits on top. For exporting economies such as China and Japan, global demand will recover only with America’s recovery.
"As time passes (and remember, this is more likely measured in years than months), we will begin to see how countries are performing on a relative basis. At that time, currency traders will begin rewarding stronger economies and penalizing weaker economies.
"But for now, there is not a legitimate alternative to the U.S. dollar, especially in light of the global interest in the safety of U.S. Treasuries.
"The Dollar Index has very sound technical support which suggests the dollar’s uptrend is well intact. We continue to recommend holding the PowerShares DB U.S. $ Index ETF."
