Consequently, foreign traders will reduce their demand for the U.S. dollar in conjunction with U.S. Treasuries. Additionally, some analysts believe that a lackluster resolution may also force the central bank to offer further stimulus aid, which will also negatively affect the greenback.
However, despite potential misgivings on U.S. debt, Steven Hess, Moody’s lead analyst for the United States, argues that demand will remain strong for Treasury bonds and, by extension, the U.S. dollar because of their dominant role in the global markets, report Tim Reid and Andrew Quinn for Reuters.
“The dollar is the preferred storer of value. As a global benchmark, the U.S. Treasury is unrivaled. We don’t see that changing any time soon,” Hess said in the Reuters article.
Moody’s will wait until 2013 before making a decision on the U.S. credit rating after analyzing multiple factors, including next year’s election and the 2013 budget, even if the sueprcommittee fails to reach a deal on Nov. 23.
iShares Barclays 20 Year Treasury Bond
For more information on U.S. Treasuries, visit our Treasury bonds category.
Max Chen contributed to this article.