Credit Squeeze's One Winner: The Dollar

After years of decline, the American dollar has reasserted itself in the face of the worldwide credit crunch. The dollar has rallied against the euro and the pound as banks and investors drop hazardous financial instruments and hold cash, Bloomberg reports, making the implication clear: For all its woes, the dollar remains the world's unrivaled reserve currency.

The dollar hit a seven-week high against the euro yesterday, and the climb is likely to continue; UBS has predicted that the euro will slip to $1.32 in the next three months. Banks paying back dollar-denominated mortgage securities are now finding themselves in competition with investment firms buying greenbacks in hopes of a further rise. (More euro stories.)