NEW YORK- Volatility across asset markets is fueling a bounce in the battered dollar, showcasing the currency’s safe-haven status amid worries over growth abroad and US political strife.
The buck is up nearly 2 percent in September as of Tuesday against a basket of currencies, on track for its best monthly gain in 14 months and outpacing the performance of many other traditional destinations for nervous investors in what has been a turbulent period for stocks.
Gold, for example, is down nearly 4 percent in September, while the S&P 500 utility sector is little changed, and the Japanese yen is flat.
Yields on the 10-year US Treasury notes, which move opposite to prices, started the month at 0.67 percent and last traded at around 0.64 percent. The S&P 500 is off nearly 5 percent in the same period.
Several catalysts are stoking the dollar’s rebound, which has put the greenback at its highest level since late July. The US currency’s 8 percent decline from its highs in March has left it looking comparatively cheaper than assets like gold, which stood at all-time highs last month. The yen’s haven status, meanwhile, may have suffered in the wake of a pandemic-era collapse in global rates.
“The dollar’s resurgence has … to do with the response of the capital markets to the global wave of de-risking,” said Thanos Bardas, managing director and co-head of global investment-grade fixed income at Neuberger Berman.
At the same time, many of the factors that made the dollar less attractive in recent months appear to be dissipating. COVID-19 cases are accelerating in Europe, threatening expectations of growth that boosted the euro, while worries over a hard Brexit have weighed on the British pound.
Additionally, speculation over the possibilities of negative interest rates in the UK and Australia have dimmed the allure of those currencies to some investors, although such a move seems far off. In the United States, uncertainty stemming from the Nov. 3 presidential election and the shrinking likelihood of lawmakers agreeing on a fiscal stimulus package this year have fueled haven demand.