[12] This emphasises the strong amplifier effect of negative rates – they are highly effective in boosting portfolio rebalancing effects, both domestically and across borders, exactly when monetary accommodation might be needed the most. And third, we have political uncertainty and the role of the US dollar in the international financial system.
The US dollar is the main reserve currency and US Treasuries are the world’s most important safe haven asset, and as such benefit from a liquidity advantage. Hence, in periods of elevated uncertainty, such as after Brexit, investors may overweight US Treasuries and underweight European assets.