Dollar outshining gold, beating yen in battle of safe havens

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 U.S. political strife. The buck is up nearly 2% 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% in September, while the S&P 500 utility sector is little changed, and the Japanese yen is flat. Yields on the 10-year U.S. Treasury notes, which move opposite to prices, started the month at 0.67% and last traded at around 0.64%. The S&P 500 is off nearly 5% 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 U.S. currency’s 8% 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.

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. The dollar index has risen by an average of roughly 2% in the two most recent upsurges of volatility. Others see the rally as a chance to take profit on the dollar or place bets against the currency, believing it will resume weakening once markets grow calmer.

Dollar outshining gold, beating yen in battle of safe havens, Reuters, Sep 30