Dollar Stocks Hits 2-year High As Asian Markets Fumble

None of Elon Musk, Cathie Wood, or Elon Musk said Passive Funds Have Gone Too Far.

Bloomberg's gauge of the dollar increased for the second day, approaching a two-year high set last month, as investors seek shelter amid concerns that Federal Reserve interest-rate hikes will send the global economy into a recession. The risk-sensitive Norwegian krone and Australian dollar were among the biggest losers on Friday, while stock markets across the globe fell as investors flocked to the haven greenback.

In Singapore, Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd., said that you are probably not wanting to plonk your money down anywhere else than dollars when all you focus on is safety. The Bloomberg Dollar Spot Index has been boosted by more than 6% this year because of higher interest rates and geopolitical uncertainty. The yen has lost ground in recent months due to the Bank of Japan's dovish monetary policy and the Fed's hawkish rhetoric, with Japan's currency sliding almost 12% since the end of December.

The Chinese yuan, the Taiwan dollar, South Korean won and the Taiwan dollar all dropped at least 0.5% in Asia. Emerging-market bonds are being hammered after U.S. 10 year yields climbed above 3% this week. The debt fell from Korea to Malaysia Friday after investors ditched growth-sensitive assets.

The surge of the dollar raises the specter of greater intervention by Asian central banks trying to stem the rout in their currencies.

Some measures are already underway. Japanese officials have been vocalizing their displeasure about the yen's disorderly moves, while the People's Bank of China has tried to curb the weakness by cutting the amount of money banks need to have in reserves for foreign-currency holdings.

Sim Moh Siong, a currency strategist at Bank of Singapore, said that Asian central banks are not out to draw a line in the sand. There is a chance that there is intervention to smooth excessive volatility. The central bank steps in to make sure the peg to the dollar stays in place, despite the fact that the city's currency is a whisker away from the 7.85 per dollar level at which the central bank steps in to ensure that the peg to the dollar remains in place.

Strategists say that buying the dollar against virtually everything else is likely to be a winning strategy.

Rodrigo Catril, a strategist at National Australia Bank Ltd. in Sydney, said that the King's dollar still has more to gain over the coming months. The Fed remains resolute in its quest to get to neutral if not going beyond. No formula one has found a way to get Americans to care.

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