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US Dollar Emerges as Best Haven As Shutdown Fear Looms

The greenback is once more proving it’s the only haven that matters.

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Treasuries are cratering and sending other bond markets down as a looming shutdown underscores the potential that US fiscal profligacy will spur issuance. With the Federal Reserve determined to keep interest rates higher for longer, investors are finding few places to hide apart from the world’s reserve currency.

  • Yen, Swiss franc, and gold are all dropping this month
  • The bond rout is helping spur demand for the greenback

The rout in US sovereign securities is actually spurring dollar demand, by helping to drive up the interest rates that buyers of the currency can receive and keep them elevated.

Investors are facing an unprecedented third straight year of losses as the $25.5 trillion Treasuries market is wracked by liquidity concerns, ever-tighter Fed policy, increased US government issuance, and the volatility created as investors get forced out of large futures bets.

 “We expect USD strength to continue, driven by growth divergences, higher rates, and potential further risk-off moves ahead.”

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