With turmoil high, there’s been plenty of activity in traditional safety plays: gold, the Swiss Franc, the yen, US Treasuries, etc.
Only the dollar hasn’t participated.
Is that worrisome? Does it mean that the US dollar is no longer seen as a safe-haven?
No and no (contrary to what Damon Vickers is saying on CNBC right now).
The reason the dollar isn’t going up is because oil is shooting higher, and this worsens the US trade deficit. It’s really hard for the dollar to rally alongside surging oil.
This chart is telling: It shows the dollar index vs. the inverse of fuel oil imports. Notice any correlation?
If US paper were really in danger of losing its safety status, then you wouldn’t see the rally in Treasuries (which, by pushing down yields, is another dollar headwind).
Of course, Treasuries have rallied. Here’s a look at 10-year futures over the past several days.