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Today’s housing market data has done little to help the stock market. After yesterday’s rally on optimism due to earnings, things are cooling off as investors look at the housing situation. It is clear that confidence in an already shaky housing market is deteriorating as the end of the first time home buyer tax credit approaches. This news is putting a damper on a rally based on economic recovery. At least, the damper is on the stock market. The U.S. dollar, on the other hand, is getting a bit of a bounce.

U.S. dollar gains as a safe haven investment

Many dollar bulls have been bemoaning dollar weakness recently. With investors in a riskier mood, not to mention focusing on U.S. debt (which undermines the dollar on a fundamental level), the U.S. dollar has fallen out of favor recently. However, with concerns about the economy back in focus, the dollar is being preferred as a safe haven currency. As an investment backed by the largest economy in the world, and by the most stable taxpayer base in the world, it takes little imagination to see why the dollar has safe haven status right now.

Could the U.S. dollar really crash?

Another issue with the recent weakness is that there might be a dollar crash. This, however, is somewhat unlikely. The dollar has mainly been returning to pre-financial crisis levels. It just seems like a dramatic drop because of how much the greenback gained during the recession. The return to normalcy feels more dire than the situation is. Besides, The Forex Blog points out, it’s not like any other currency is in a much better position:

While forex investors in recent years have enjoyed ganging up on the Dollar, the fact remains the fundamentals for the other major currencies remain just as weak. For example, a model of purchasing power parity developed by “the Organization for Economic Cooperation and Development finds the dollar is worth roughly 0.85 euro, compared with its market valuation of 0.67 euro, suggesting that the euro is 21% overvalued.”

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.