Dollar May Increase Without Agreement on U.S. Debt Ceiling, Citigroup Says
A failure by President Barack Obama and U.S. lawmakers to reach an accord raising the debt ceiling and cutting the budget deficit may fuel a short-term rise in the dollar as investors seek safety, according to Citigroup Inc.
“When risk aversion picks up and uncertainty dominates market psychology, people look for the most liquid and deepest markets they can find, and that’s historically been U.S. Treasuries and U.S. dollars,” Andrew Cox, a currency strategist at Citigroup in New York, said in a telephone interview.
The stalemate between the White House and congressional Republicans over increasing the $14.3 trillion debt ceiling and reducing the deficit has pushed stocks down and is likely to contribute to a move away from higher-risk assets, Citigroup said in a note to clients today.
Standard & Poor’s reiterated July 21 it may cut the U.S. debt rating to AA+ from AAA if a deal is reached that doesn’t address the U.S.’s long-term debt burden. The New York-based ratings company said the chance of a downgrade during the next three months is 50 percent. It placed the rating on “CreditWatch” for a downgrade on July 14.
House Speaker John Boehner of Ohio told fellow Republicans he was determined to force action on a two-step debt-limit extension that would provide a roughly $1 trillion, shorter-term increase than President Barack Obama has requested, defying a veto threat and the administration’s warnings of dire economic consequences.
The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, declined 0.1 percent today to 74.105 in New York. The measure reached 73.889 on July 21, the lowest level since June 9.
To contact the reporter on this story: Joe Ragazzo in New York at jragazzo@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
July 26 (Bloomberg) -- Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, talks about negotiations between U.S. lawmakers over the nation's debt limit and the outlook for the country's debt rating. President Barack Obama warned that burgeoning debt threatens to do "serious" damage to the economy and that Congress must compromise to address future deficits. Halmarick also discusses the U.S. bond market and dollar. He speaks from Sydney with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
July 25 (Bloomberg) -- Otto Waser, chief investment officer of R&A Research & Asset Management AG, discusses the European sovereign debt crisis after today's downgrade by Moody's Investors Service of Greece's credit rating to Ca from Caa1. Waser, speaking from Zurich with Linzie Janis on Bloomberg Television's "Countdown," also talks about the U.S. economy, the debt-ceiling debate and the outlook for the euro and dollar. (Source: Bloomberg)
July 25 (Bloomberg) -- Puru Saxena, chief executive officer of Puru Saxena Wealth Management in Hong Kong, talks about the outlook for China's real estate market. Saxena also discusses his investment strategy for global stocks and commodities, and negotiations between lawmakers over raising the U.S. debt limit. He speaks with Susan Li, Rishaad Salamat and Philip Yin on Bloomberg Television's "Asia Edge." (Source: Bloomberg)
Rate this Page
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.