2023-09-26 14:25:43
The collapse in the US government bond market and concerns about a possible suspension of US government agencies (shutdown) increased demand for the dollar. writes Bloomberg.
On Tuesday, the dollar index (DXY), which shows the value of the dollar against a basket of currencies of countries that are the main trading partners of the United States, rose by 0.2% to 106.2 points, that is, to a maximum in ten months. Over the month, the Japanese yen and Swiss franc fell more than 2% against the dollar. Gold, which has traditionally been a safe-haven asset for investors during periods of economic crises and high levels of uncertainty in markets, also fell in price.
A partial shutdown of US government agencies is possible if Congress does not agree on funding for the work by the end of September. The federal government will have to shut down if the budget for the next fiscal year, which begins October 1 in the United States, is not passed. In the event of a shutdown, up to 800 thousand civil servants across the country will not work, which will reduce the authorities’ expenses.
Ten-year US Treasury bond yields on Tuesday, September 26, rose to 4.566%, a 16-year high. A large number of US Treasury auctions this week and fears of a US government shutdown have further fueled negative market sentiment. Investors who invested in US Treasury bonds suffered losses for the third year in a row, including due to liquidity problems, the increasingly tight monetary policy of the Federal Reserve and an increase in emissions by the US government, the publication writes.
Nomura strategist Andrew Ticehurst expects the US dollar could continue to strengthen against other currencies, driven by economic growth divergences, higher interest rates and possible further risk aversion.
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