Even as equities have rallied substantially from April lows, recovery in the dollar index, or DXY, has underwhelmed and the currency sits near the lowest level it's been in three years. Alex Cohen believes that while there are cyclical reasons for the dollar weakness, there's also been a bigger structural rethink on the currency by investors from the push toward de-globalization and from questions around US exceptionalism. Alex sees German fiscal reforms as a game changer, another dollar negative. But our own survey shows very negative sentiment for the dollar, which is relevant to the short term. Mark Cabana contributes with a discussion of rates given the important interplay between the Treasuries and currencies. Mark believes that there has been a shift away from US Treasuries by global investors, although a lot of this recent shift is a function of investors reducing their overweight position rather than getting outright negative. Mark also discusses debt sustainability concerns and how budget negotiations may impact bonds going forward.
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