There is no escape for money! With a government shutdown looming, the dollar is a safe haven

　　A US government shutdown seems almost certain. In the face of the impending government shutdown, the market anticipates that the US Treasury may issue large amounts of US debt, the price of US Treasuries is plummeting and dragging down the rest of the bond market, and the safe-haven function of bonds seems to have been lost. With the Fed determined to keep interest rates higher for longer, investors are finding few safe havens in currencies other than the dollar.

　　The rout in Treasuries has actually spurred demand for dollars because it has helped push up the interest rates available to buyers of foreign currencies and kept them high. Investors are bracing for an unprecedented third straight year of losses as the $25.5tn US Treasury market has been rocked by liquidity concerns, continued tightening by the Federal Reserve, increased issuance of US government debt and volatility caused by investors being forced out of big bond futures bets.

　　Analysts at Nomura believe that the current dollar is a high-yield, high-growth safe haven, which is unusual, but the dollar is exceptionally powerful. The dollar is likely to continue to strengthen, driven by widening growth differentiations between economies, rising interest rates and potential further risk-off moves ahead.

　　As far as the eye can see, traditional safe-haven assets are taking a big hit. Global government bond markets are heading for their worst month in a year this month, with the Japanese yen and Swiss franc, two traditional safe-haven currencies, down more than 2%. Gold prices are also falling. Bitcoin is up slightly this month, but still down 14 percent for the quarter.

　　The yen is set to fall more than 10 per cent for the third year in a row as the Bank of Japan sticks to extremely loose monetary policy amid a wave of global monetary tightening. The BOJ intensified its dovish stance this month, disappointing yen bulls who had hoped it would signal an end to negative interest rates.