The passage of a sprawling budget bill has raised concerns over the long-term debt of the United States, which analysts said could compound already heightened worries over the reliability of the country’s currency as a safe-haven asset.
It is also set to raise the federal government’s debt ceiling by US$5 trillion, surpassing the US$4 trillion allocated by an earlier version of the bill. This creates more room for the Treasury Department to borrow to repay future obligations, but allows for greater debt accrual in the future.
“In the months leading up to the bill’s passage, investors had already been discussing how to diversify risk and reduce their exposure to US dollar assets,” he said.
Even without the bill, Yeung noted, momentum for diversification has been building in a number of countries.
