U.S. dollar could depreciate on the Asian markets on Monday, with increasing the yield of U.S. Treasury securities, but any reaction triggered by the U.S. credit rating downgraded by S & P will be moderated due to the state debt crisis in the euro area.
“The initial response will consist of a high degree of uncertainty and hence volatility, since investors will not know where to turn for safety. During the sub-prime crisis, the safety was in U.S. dollars and Treasury bonds . Now, this anchor of the global community is deteriorating”, said for Reuters Mark Mobius, executive chairman of Templeton Emerging Markets.
The fears of a re-entry of the biggest world economy into recession have led to heavy losses on the world stock markets this week, causing losses of 2,500 billion dollars in just five days.
Companies that depend on consumer demand and external demand will likely suffer declines in the next period.
Shares on stock exchanges around the world, measured by the MSCI All-Country World index, saw the steepest depreciation since early October of 2008, shortly after the collapse of Lehman Brothers.
The traders warn that the downgrading of U.S. ratings will increase the already significant contraction of the investors’ predisposition toward risk. Therefore, the Japanese yen and Swiss franc could again be targeted by markets as refuges from the crisis in the U.S. and euro area, although authorities in both countries have recently taken aggressive steps to reverse the upward trend of their currency.
On the other hand, fears that the state debt crisis in the euro area could swallow Spain and Italy suggest that investors may still perceive the dollar as a safe asset, despite the problems facing the U.S.
Analysts at Goldman Sachs believe that the United States have a chance in three to return to recession because of the worsening of the crisis in Europe and high unemployment.