Is US safeguarding its Currency??????

Last decade gives us a clear picture that currency traders who seek profits by borrowing from nations with low interest rates to fund their own purchases in countries with high yield (carry trade)are loosing more money than any time. A study says that this strategy has lost 2.5% in 2010 as, dollar which is considered as the favorite for financing the trades because of its universal acceptance and also because of record low US rates got appreciated, according to an index compiled by UBS, the world's second largest foreign exchange trader. This is even more than the 0.98% drop in the very famous sub prime crisis year that is 2008 wherein the collapse of Lehman Brothers Holdings caused credit markets to freeze and this year was the worst year as far as performance is concerned for carry trades.

Thus gains in manufacturing and retail sales are leading the investors to buy dollar more rather than to sell it to fund their own other investments. Hence the falling demands for carry trades may help the greenbacks extend a rally that is driving the Intercontinental Exchanges which has moved USD up by 4.5% from its 12 month low in November.

According to Mr. Mitul Kotecha, Hong Kong base head of global foreign exchange strategy at Credit Agricole CIB, a unit of France's second biggest bank: "US will look reasonably strong compared to other economies" because bond yields will move higher, and that will certainly reduce the attraction that dollar possess as a funding currency.

Japanese prime minister Naoto Kan said that US was following a "weak dollar policy" through its plan to buy treasuries. According to Chinese central bank adviser Xia bin this will lead to "uncontrolled money printing".
Whereas German Finance minister called the strategy as Clueless.

Now its the time to go through all these statements and analyze what they are up to. According to me it's just a commendable strategy where in US is safeguarding its currency and is trying to bolster dollar with the help of losses through currency carry trade.