The inability of non-US banks to roll over short term funding of investments in illiquid US assets has been a key factor behind the dollar’s strength since last summer – and should continue to support the greenback, says Mansoor Mohi-uddin, managing director of foreign exchange strategy at UBS.
“At the height of the credit bubble in mid-2007, the Bank for International Settlements estimates that major European banks’ dollar funding needs was around $1,300bn,” he says.
