From a comment at Follow the Money blog on the dollar’s sharp move up this fall, during the crisis:

“One of the interesting patterns in the events of this year is US banks using margin calls and collateral liquidations to export deflation globally. They appear to coordinate the margin calls, for example, the prime brokers MS, GS and JPM all raised margin by more than double on thousands of hedge funds on 1-2 October while they were simultaneously railroading the TARP through the House. Margin was due two weeks later, coinciding with a massive sell off in quality assets worldwide, especially gold and oil.

The result is deflation overseas much worse than in the US, particularly to emerging economies where liquidity was more concentrated in the few big players and the hedge fund/private equity funds.

As they have forced sell-offs abroad, they repatriate the margin or collateral proceeds, driving up the dollar and inflating the relative performance of US assets.

Jobbing backwards, it was clear this margin deleveraging occurred in January, March and October – at the very least. As prime brokerage is largely unregulated and data is unreported, this happened outside the normal visibility of the markets.

It would be interesting to know how closely involved Geithner and Paulson are in these margin calls.

It will also be interesting to watch what happens when the deleveraging hits its limit, as the dollar will then be much more difficult to fluff….”

Comment: 

Looks like the dollar is on its way down now.