Jane Foley

Speaker states the dollar is strengthening due to its safe-haven status amid escalation, that markets entered the crisis "short of the dollar," and that further escalation will lead to "further moves into the U.S. dollar." Geopolitical uncertainty and risk aversion drive demand for the most liquid safe-haven asset (USD). Existing market positioning (short dollars) can fuel a sharper rally as those positions are unwound. LONG because the dollar is the primary beneficiary of safe-haven flows during this escalating conflict, supported by a favorable positioning backdrop. A credible and imminent ceasefire deal that drastically reduces geopolitical risk premium.

The speaker explicitly states that the flight to the USD as a safe haven "leaves high yield in currencies, those of emerging market space, particularly very vulnerable." During risk-off episodes driven by geopolitical fear, capital flees higher-risk assets. High-yielding EM currencies are classic risk assets. As the USD strengthens due to safe-haven flows, EM currencies face direct downward pressure from both capital outflows and USD appreciation. The identified vulnerability implies a high probability of underperformance and depreciation for EM currencies as long as the current risk-off, USD-positive environment persists. A swift, peaceful resolution to the conflict that calms markets and reignites risk appetite, prompting a reversal of flows back into EM assets.