What happens when a currency is repatriated? How has currency repatriation recently increased the value of the dollar relative to other currencies? Where has the money come from in the first place, when investors (hedge funds etc) repatriate the dollar? Can someone provide an example of this please?
Thanks for your help, it will be extremely appreciated as I’m having trouble understanding the whole picture?
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The answer is very simple. “repatriation” means returning to the country of origin. Thus if you are someone with an overseas investment, you money has “left the country”. If you close, exit or sell that investment you money returns back to you its country of origin.
This has been very strongly exemplified recently because of the nervousness investors are feeling giving a strong global financial crisis. Thus, those with “risky” investments that are outside their country, are closing those investments so they can have their cash close to them. They feel more secure right now with the money in something that is more secure.
This attitude is shared by literally millions of people all over the world, but seems very exaggerated in the US. So with millions of people wanting to cash out their investments it has created a strong demand for the US Dollar.
As with anything when demand rises, so does value. Thus the US dollar has risen sharply in value compared to other currencies around the world, (with the possible exception of the Yen).
What that means to other investors in other parts of the world is that when they see the US dollar rising in value, they too decide to keep their money in cash, and the cash they chose is the dollar, because it is considered a “safe haven” for currency. So this increases the demand for dollars even more.
This by the way is a good thing for the US right now as prior to this the US dollar was at all time lows against every major currency in the world.