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Investors Flee Dollar Assets Amid Tariffs Uncertainty

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Bloomberg Apr 11 01:24 · 16.5k Views

The dollar has emerged as the latest victim of this week’s market turmoil as a worsening global trade war risks derailing US economic growth with havens such as the yen, Swiss franc and gold benefited from the outflows. Other US assets also suffered. The S&P 500 Index finished the day 3.5% lower on Thursday, while long-term Treasuries sank. Bloomberg's Valerie Tytel reports.

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Transcript

  • 00:00 We saw a
  • 00:00 huge flight out of the US dollar into other safe havens, one of those being
  • 00:06 the the Swissy dollar Swiss assault, one of its biggest moves
  • 00:09 since the Swiss D pegged in 2015.
  • 00:12 A 4% move
  • 00:13 into the Swiss franc is really starting to pose some questions.
  • 00:17 Are we fleeing US assets and possibly repatriating them
  • 00:20 into other currencies?
  • 00:21 The Swiss was a big mover.
  • 00:23 yen was a big mover as well.
  • 00:25 But take a look.
  • 00:26 This move is not.
  • 00:27 This move is continuing to extend to Tom.
  • 00:30 The euro up nearly a percent so far in the overnight session.
  • 00:33 As we begin to question whether the dollar is acting as a safe haven and if this this is possibly permanent damage
  • 00:40 to the dollar as a safe haven assets.
  • 00:42 I want to show you one chart which I thought very surprising is that normally in the past when we see huge bouts of volatility in the FX market, when we see the VIX spiking, it normally goes hand in hand with a surge for dollar assets.
  • 00:55 We have definitely not seen that in the last week.
  • 00:58 If anything, we've seen the exact is it, we're seeing a breakdown of some of the fundamental assumptions underpinning
  • 01:04 global finance and we'll see to what extent that becomes crystallized.
  • 01:07 What a week it's been.
  • 01:08 Valerie would say
  • 01:09 take a beat and and just kind of take a breath
  • 01:11 and you've been front and centre on driving our focus or again around the routes in the in the debt market and what that could portend.
  • 01:18 Just as you wrap up what we've seen this week in terms of the the size, the scale, historical context,
  • 01:23 talk us through where we've landed.
  • 01:25 Look at historical swings in all markets.
  • 01:27 Tom, I want to say that if you're looking at the equity market, you're missing the main point.
  • 01:31 The equity market was actually up on the week, Tom.
  • 01:33 The S&P 500 had its best week since Election Day,
  • 01:36 but that is completely
  • 01:38 missing the point you flip on.
  • 01:39 Take a look at this next chart.
  • 01:40 We're seeing
  • 01:41 a flea from dollar assets when it comes to the dollar and treasury yields
  • 01:45 delinking.
  • 01:46 This is normally something that is only seen in emerging market economies, not not not an economy that is known as the safe haven status that is known as the world's reserve currency that we see Treasury yields rising alongside
  • 01:59 a huge crash in the dollar.
  • 02:00 This is posing big questions over whether Trump's trade policy is perhaps going to put this safe haven reserve currency status in peril.
  • 02:09 And with that, the the big structural demand for Treasuries.
  • 02:12 Many people scratching their heads
  • 02:14 this morning thinking that if the US China trade relationship
  • 02:18 comes to a standstill, so does China's recycling of those dollars into the Treasury market.
  • 02:23 And does that perhaps put the US deficit on a SIS unsustainable path?