Tuesday, July 26, 2011

Citigroup: US dollar may gain as a safe haven

Analysts at Citigroup believe that the demand for the greenback as a safe haven may rise in the situation of uncertainty caused by the lack of agreement between Barack Obama and US Congress on raising the $14.3-trillion debt ceiling and reducing the budget deficit.

The specialists remind that during the times of elevated risk aversion investors tend to seek most liquid and deepest markets and American Treasuries and dollars have traditionally been such.

As US authorities have reached the deadlock, stock markets are down so that investors’ risk sentiment worsens. That will make traders desert riskier assets.

House Speaker John Boehner who represents the main opposition force against the White House’s called for a 2-step debt-limit extension that would provide a roughly $1 trillion – less than Obama has requested – demonstrating his unwillingness to compromise and withstanding the threat of President’s veto.  

Standard & Poor’s estimates the possibility of US rating cut from AAA to AA+ within 3 months by 50%.

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