In global markets, the dollar is currency king

The dollar led gains in world markets last month, beating global measures of bonds, stocks and commodities, as the threat of U.S. budget cuts proved no barrier to investors snapping up American assets.

Intercontinental Exchange’s Dollar Index, which tracks the currency against those of six major U.S. trading partners, climbed 3.5 percent in February, ending a two-month decline. Global fixed-income assets rose 0.6 percent, including reinvested interest, Bank of America Merrill Lynch indexes show. The MSCI All-Country World Index of stocks added less than 0.1 percent after dividends. The Standard & Poor’s GSCI Total Return Index of metals, fuels and agricultural products slid 4.4 percent, its biggest retreat since May.

The dollar’s advance underscores how investors are backing the world’s biggest economy to weather the effects of the spending reductions, known as sequestration, that were expected to take effect yesterday. While the nonpartisan Congressional Budget Office said the cuts will wipe 0.6 percent off U.S. growth this year, home sales, consumer confidence and employment are improving at the same time the Federal Reserve vows to continue its unprecedented support.

“Even if the United States isn’t growing rapidly, it’s still looking more robust than others, including the euro area, the U.K. and Japan,” Alan Ruskin, global head of G-10 foreign-exchange strategy at Deutsche Bank AG in New York, said Feb. 25 in a telephone interview. “Pretty much everywhere in the G-10 is looking soft on a relative basis.”

Bloomberg