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Dollar Finds Support as the “Least Worst” Option, Says HSBC.
The U.S. dollar is back in the game this October — not because America’s problems have gone away, but because everyone else’s have gotten worse.
That’s the gist of HSBC's latest Americas FX Morning Bullets, a publication released on a daily basis by the bank's FX strategists.
"There is some irony that fiscal concerns outside the US are helping to drive this October’s rally in the USD," HSBC says.
Just a few months ago, markets were fretting about America's ballooning deficits. But since President Trump’s One Big Beautiful Bill Act passed in July, those concerns have faded, even as fiscal credibility questions have shifted to France, Japan, and the UK.
The greenback has since staged a mini-rally after months of weakness, breaking through key levels such as EUR/USD below 1.1650, GBP/USD below 1.35 and USD/JPY above 151.20.
This is because, according to the bank, the dollar has become "the least worst choice among G10 currencies" as fiscal and political worries elsewhere weigh more heavily on sentiment.
In other words, investors may not love the dollar right now, they just dislike everything else more.
What makes this all the more striking is that the U.S. is in the middle of a government shutdown.
Unlike previous episodes, this one hasn’t dented the dollar:
"It is remarkable that the US government shutdown is not undermining the USD,” HSBC writes, noting that rising equity markets and firm risk appetite suggest that fear-driven flows aren’t the explanation either.
Instead, the bank argues the dollar’s stability comes from a mix of resilient U.S. assets, fading “anti-dollar” narratives, and renewed weakness in key alternatives.
The euro, which “thrived for much of 2025 simply because it was not the dollar,” is now struggling with its own local headwinds.
France remains bogged down in political brinkmanship over pension reform, while fresh data out of Germany, a 4.3% monthly drop in output and an 18.5% plunge in auto production, undercuts hopes of a late-year industrial rebound.
That contrast helps explain why the euro has lost its safe-haven shine.
“Local negative drivers have greater traction for the EUR now,” HSBC notes, suggesting that the currency’s earlier resilience was more about global positioning than domestic strength.