The dollar led gains in world markets last month, beating global measures of bonds, stocks and commodities, as the threat of U.S. budget cuts proved no barrier to investors snapping up American assets.
There’s at least one thing that bulls and bears on the U.S. economy agree on: the dollar, the most undervalued major currency in the world, is due to rise as Europe’s sovereign debt crisis threatens the global recovery.
The dollar fell against most of its major counterparts amid a rise in risk appetite after German Chancellor Angela Merkel’s government backed the European Central Bank’s bond-buying plan to curb the area’s debt crisis.
The dollar posted its biggest monthly gain since 2011 in May, beating bonds, stocks and commodities for the first time this year as investors sought refuge in U.S. assets while Europe’s sovereign crisis worsened.
The dollar rose to a seven-week high against the euro as European finance ministers ducked investors’ pleas for a bailout package for debt-strapped Ireland and doubts surfaced over Greece’s economic health.