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US Dollar / Risk Relationship Breaking Down?
Tuesday, 14 October 2008 23:34:11 GMT
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The US dollar may be breaking free of the close relationship to risk sentiment that we had observed in recent weeks. We noted last week that the greenback had gained in spite of shaky US fundamentals as investors spooked by risky market conditions abandoned stocks and other higher-risk assets to flock to long-term US Treasury bonds. Indeed, EURUSD and the 30-year "Long" bond had exhibited an inverse correlation of over -80%. Current positioning seems to suggest the two assets are disengaging from one another: having peaked at -84% last week, the reading now stands at -77%.
US Long Bond vs. EURUSD Spot:
Source: Bloomberg
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