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Saxo Bank’s FX risk indicator is based on the evolution of Asian currencies (excluding Japanese yen) versus the US dollar. Since Q4 2021, we see a continued increase in risk aversion in the FX space. This is the first time since the first global lockdown in 2020. In our last update, our indicator is down minus 8.9 % in Q3. This is the biggest drop since Q3 2015 when China devalued the renminbi by surprise. There are several aspects behind the rise in risk aversion : the risk of a global recession, the European energy crisis, the consequences of the Ukraine war, ‘permanent’ inflation and, first and foremost, the drop in U.S. dollar liquidity. In our view, this is one of the most important and less commented drivers. Based on our own data, global U.S. dollar liquidity is in a contraction for the first time since early 2019 (at that time the Chinese-U.S. trade war was the main disruptive factor). We expect that the coming months will remain challenging for most of the risky assets (including emerging FX currencies) as the risks mentioned below further materialize. We remain in a U.S. dollar-centered FX market, with very little alternatives.