What have you always wondered about the economy? Tell Us

Subprime mess good for something

Ashley Milne-Tyte Aug 16, 2007

TEXT OF STORY

Scott Jagow: Wait, I do have something positive to say. One silver lining in the stock-market turmoil might be the dollar.

A few weeks ago, the dollar was at historic lows against the pound and the euro. But things have changed. Ashley Milne-Tyte has more.


Ashley Milne-Tyte: The dollar is no longer in the doldrums.

Marc Chandler, chief currency strategist with Brown Brothers Harriman, says that’s because of European ties to the subprime mortgage mess.

Marc Chandler: Last week, when a French bank had problems with a couple of its funds and stopped people from getting their money back out, it indicated that there was, in effect, a shortage of dollars in the world.

The bank was BNP Paribas. The funds were invested in U.S. subprime debt. That bank and other European banks are now rushing to buy dollars to pay back loans used to purchase that dodgy debt, giving the currency a boost.

But, Chandler says, as for its longer-term prospects:

It’s not as if people are buying the dollar because they like what’s going on in the U.S. They’re buying the dollar primarily because they’re short U.S. dollars.

He expects the dollar to weaken again when the turmoil in the credit markets tails off.

In New York, I’m Ashley Milne-Tyte for Marketplace.

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.