Economists at Credit discuss Suisse FX market outlook amid debt ceiling fears.

If taking a short USD view is seen as essential, CHF and JPY are the obvious counterparts

“As far as the debt ceiling is concerned, markets, in general, continue to show very little imminent sense of danger.”

“The problem is that picking USD direction in the event of a debt default is not easy. While in theory, the currency should suffer due to self-inflicted problems, in practice a USD funding shock could arise too that actually boosts the greenback in the first instance. This suggests FX hedges that play for higher FX volatility are probably a better option than those that look for clear and consistent directionality.” 

“If taking a short USD view is seen as essential, we would stick to the likes of CHF and JPY as the obvious counterparts as more pro-cyclical currencies could easily falter in a US default environment.”