Oct. 19 (Bloomberg) -- Citigroup Inc. is purchasing higher-yielding currencies before a resolution to the European debt crisis, citing a long-term lack of dollar demand.
The U.S. currency’s rally in September was driven by the safety appeal of Treasuries rather than other U.S. assets, signaling an inherent weakness in the greenback, according to Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York.
Treasury Department data released yesterday show foreign private investors bought $70.1 billion of U.S. notes and bonds in August, compared with purchases of $1.9 billion of corporate bonds and $9.9 billion of agency bonds. They sold $6.6 billion of equities. They sought refuge in Treasuries during the financial turmoil that followed the Aug. 5 downgrade of U.S. debt by Standard & Poor’s.
“Investors aren’t buying the dollar because they like it, but because in the worst of all worlds it remains the safest asset, and once you exit from that world it’s the least attractive,” Englander said in an interview. “We’ve positioned ourselves to buy risk in the view that the small G-10 currencies are going to rebound strongly once we get past this episode.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, rose 6.3 percent in September, the most since October 2008. The gauge has lost 2.1 percent this month.
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