China’s central bank said on Wednesday that stabilising the foreign exchange market is the top priority, after the yuan weakened to its lowest level since the global financial crisis of 2008. The remarks from the People’s Bank of China (PBOC) came as the tightly-managed yuan continued to weaken against the surging U.S. dollar, falling 0.9% on the day and taking its losses so far this year to over 12%. In offshore trade, the yuan hit a record low. The PBOC said the FX market was largely operating in an orderly ...

The recent rally in the U.S. dollar is creating an “untenable situation” for riskier assets that could end in a financial or economic crisis, strategists at Morgan Stanley (NYSE:MS) warned in a note Monday. The dollar index hit a new two-decade high Monday as the pound hit an all-time low against the greenback. The wild swings in currencies are another pressure on the global economy and corporate earnings, which are expected to fall as the Federal Reserve’s aggressive interest rate hikes over the summer begin to weigh on spending. “The ...

USD: All systems are go Whether it be US data surprising on the upside, the US administration showing no concern at all with the strong dollar, or new chapters in the energy war in Europe, it looks like all systems are go for the dollar rally. Trying to pick a dollar top in the current climate is an exercise in futility. The dollar is clearly in the midst of a very powerful rally and one akin to the macro settings in the early 1980s when US authorities were also trying ...

Chinese monetary authorities are asking local banks to revive a yuan fixing tool it abandoned two years ago as they seek to steer and defend the rapidly weakening currency, a source said. The source, who is familiar with the yuan rate-setting process, said monetary authorities were prodding banks to include the so-called counter-cyclical factor in their daily fixings for the tightly-managed exchange rate. It’s an adjustment that 14 banks make to their yuan quotes that the People’s Bank of China (PBOC) uses to set the daily reference rate, effectively introducing ...

Nervous financial markets propelled the safe-haven dollar to a two-decade peak on Wednesday as rising global interest rates fed recession worries, while sterling drifted lower after the latest warnings about Britain’s radical tax cut plans. The U.S. dollar index rose around 0.5% to hit a new high of 114.78, its march higher helped by an equally relentless climb from benchmark U.S. 10-year Treasury yields, which rose to 4% for the first time since 2010, climbing as high at 4.013%. [US/] The dollar’s gains were broad based, with the euro down ...

Some investors are growing concerned the dollar’s meteoric rise is setting the stage for a rapid reversal, which would bruise those who have sought refuge in the U.S. currency in recent months. Soaring U.S. interest rates, a comparatively strong American economy and demand for a haven from wild gyrations in asset prices have lured investors to the dollar, driving it up about 22% against a basket of currencies in the past year. Some investors worry the dollar trade has become excessively crowded, raising the risk of a sharp unwind if ...

Trading in tumultuous foreign exchange markets is akin to being in a casino right now, according to some traders navigating markets that have been whipsawed as central banks and governments try to right their economies. In the last week, sleep-deprived traders have worked flat-out advising clients on the markets’ extraordinary moves: the crash of Britain’s pound to an all-time low, the Japanese monetary intervention to prop up the falling yen, and the euro’s deeper plunge below dollar parity. Towering above all is the mighty U.S. dollar which is trading at ...

As a drizzle fell over a grey autumnal London, and the pound plummeted on traders’ screens, U.S. tourist Heather Davidson saw one gleaming bright spot on her horizon – the chance of ever cheaper treats in Covent Garden’s boutiques. Across town, the capital’s financial district was still reeling from the impact of new finance minister Kwasi Kwarteng’s tax cuts which, as the biggest since 1972, will be funded by huge government borrowing. Sterling plunged after the cuts were announced on Friday and fell again on Monday to a record low. ...

Sterling’s slide to record lows leaves it staring at parity with the dollar. Whether or not it hits the symbolic level, investors say Britain’s new government has dealt such a blow to the UK’s standing with markets that rebuilding confidence could take more than emergency interest rate hikes. The pound, the most visible gauge of investors’ perception of the UK, plunged to as low as $1.0327 on Monday, an 8% fall from the moment UK finance minister Kwasi Kwarteng unveiled a “mini budget” on Friday with 45 billion pounds ($48 ...

USD: An array of Fed speakers today Monday was a wild day in FX markets. Sterling was falling heavily and the dollar was firmer across the board as both bond and, to a much lesser degree, equity markets were under pressure. G7 FX volatility is now back to levels last seen in March 2020. Interestingly EMFX volatility is higher too, but still below the highs of this year. Sterling is clearly making a difference here. The narrative remains the same. Central bankers remain wholly focused on taming inflation – even ...

Defining a crisis Unlike equity markets where in excess of a 20% fall from a peak is called a bear market, definitions in FX markets are a little looser. Suffice to say that GBP/USD is the worst performing G10 currency this year at -20% year-to-date, just pipping the Japanese yen to that position. (Japan intervened last week to support its currency for the first time since 1998). Typical emerging market currency crises since the early 1990s have seen exchange rates fall anywhere near 50-80%. The large size of these adjustments ...

The dollar on Tuesday took a pause in what has been a relentless climb higher as the euro and even the besieged Japanese yen and British pound managed to recover a little ground, but medium-term fundamentals were still in the greenback’s favour. The euro rose 0.42% to $0.9647, sterling climbed nearly 1% to $1.0783, and the dollar slid 0.33% against the yen to 144.25. These moves were minor however compared to the multi-year lows at which all three currencies are languishing. The euro was still near its 20-year trough hit ...

China’s central bank on Monday announced fresh steps to slow the pace of the yuan’s recent depreciation by making it more expensive to bet against the currency, as global policymakers grappled with the economic effects of a broad dollar rally. The People’s Bank of China (PBOC) said it would raise the foreign exchange risk reserves for financial institutions when purchasing FX through currency forwards to 20% from the current zero, starting on Sept. 28, to “stabilise FX market expectations and strengthen macro prudential management.” China has adjusted the FX risk ...

USD: Bolstered by Europe’s troubles Another week of large dollar gains forces us to re-address the question of whether the greenback is close to its peak. The answer can be found in the key drivers of the dollar’s strength. The first is Fed tightening expectations, which do not look likely to be scaled down in the very near term, especially after Chair Jerome Powell recently reiterated his commitment to bringing down inflation in spite of the potential economic damage. We have been highlighting how monetary policy is having a less ...

The dollar’s surge to new highs, even as monetary authorities around the world jack up interest rates or intervene to support their domestic currencies, shows that central banks fighting the ‘reverse currency war’ are doomed. In the battle against an ultra-hawkish Fed, there is only one winner: the dollar. The third week of September 2022 has gained instant historic status as the Federal Reserve’s third consecutive rate hike of 75 basis points – and promise of more tightening to come – sent global markets crashing, and the dollar to the ...