Dollar Looks Best Defensive Currency During Bond and Equity Selloffs

Dow Jones
08/20

1449 GMT - The dollar remains the most reliable defensive currency during selloffs in equities and bonds, BNY strategist Geoff Yu says in a note. The U.S. currency is bolstered by its global reserve status and relatively high U.S. real yields adjusted for inflation, he says. During three recent episodes of simultaneous bond and equity stress, the Swiss franc, Singapore dollar and euro--key alternative safer currencies--tended to weaken or perform well only intermittently against the dollar, BNY research shows. "There is little evidence that any major non-dollar currency provides a reliable hedge," Yu says. BNY suggests maintaining dollar exposure for protection, using the Swiss franc, Singapore dollar and euro "selectively as secondary defensive positions."

 

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