Thursday, July 28, 2011

Nomura: US dollar is losing its safe haven status

Strategists at Nomura Securities warn that US dollar may lose its safe haven status if the nation’s credit rating is cut from the top AAA level.

The specialists note that during 4 of the last 5 the greenback was moving down in line with the S&P500 index, while normally it does so for 1 day out of 3. That means that American currency wasn’t really supported by the rising risk aversion.

Nomura also underlines that dollar has a habit of strengthening with the growth of US Treasury yields and the decline of their price. However, so far the opposite has been happening. This may be regarded as another indication that US dollar is no longer perceived as a refuge as investors stopped using it against falling Treasuries.

As a result, if dollar no more trades as a safe haven and US interest rates are well below those of most riskier currencies with top credit rating the demand for it will slump.

As a result, the analysts advise to buy AAA-rated Canadian and Australian dollars, Swiss franc and Scandinavian currencies in case of US downgrade. At the same time, it’s better to stay away from US currency before the uncertainty fades away.

daily audusd 16-57

Chart. Daily AUD/USD

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