Ben Emons, Columnist

Dollar Hoarding Is a Year-End Risk for Markets

The effect may be more pronounced this year as tensions around the U.S. debt ceiling and competing tax bills cause the greenback to appreciate.

November 22, 2017 at 8:00 AM UTC

By Ben Emons

Ben Emons is the founder of FedWatch Advisors, a firm specialized in analysis and investing around the Fed. Previously he was associated with NewEdge Wealth as head of fixed income and Medley Global Advisors as Managing Director of Global Macro Strategy. The opinions expressed are his own.

Dollars are about to get scarce.
Photographer: Yasin Agkul

Provide news feedback or report an error

Site feedback:

Take our Survey

This article is for subscribers only.

In the waning weeks of 1999, there was widespread concern that software programs might not recognize the number 2000 once the calendar turned from December to January, crippling computers and creating mass chaos in what was referred to as "Y2K." We now know that didn't happen, but those anxieties have a legacy in financial markets.

Ever since then, financial institutions and companies take extra efforts to fund their operations over the year end in what has become known as the "balance sheet effect." This generally entails the hoarding of dollars, creating a squeeze in demand for greenbacks that can have a negative impact on markets and tighten financial conditions. The effect may be more pronounced this year as tensions around the U.S. debt ceiling and the competing Republican tax bills in Congress come together in a way that could cause the dollar to appreciate in value.