Short positions on China’s yuan rose to a record as investors piled up bearish bets on all Asian currencies on concerns over a slowdown in the world’s second-largest economy and broadening global price pressures, a Reuters poll found. Shorts bets on the Indonesian rupiah and India’s rupee both hit multi-year highs, according to the survey of 10 respondents. Fears that the Chinese economy could shrink in the second quarter and concerns over the U.S. Federal Reserve’s ability to tame accelerating inflation have boosted safe-haven demand and, thus, the dollar, while ...

The U.S. dollar was headed for its worst week since early February versus major peers on Friday, as some of the heat faded from the currency’s breakneck 10% surge. The greenback has been supported by a flight to safety by investors, amid a rout across markets due to fears of the impact of soaring inflation and Russia’s invasion of Ukraine. But after rising in all but two of the last 14 weeks, the dollar index was on track for a 1.5% weekly fall on Friday. The index, which tracks the ...

U.S. Treasury Secretary Janet Yellen has barely made any public comment on the dollar’s exchange rate since she assumed office in January last year, but she may have to find her voice soon. She will meet other Group of Seven finance ministers and central bankers in Bonn this week against one of the most challenging global economic backdrops in decades, at the heart of which is the role of the seemingly omnipotent U.S. dollar. Measured against a basket of major currencies it is the strongest it’s been for 20 years. ...

In volatile currency markets, one trade stands out as an easy bet: selling the British pound. With the world’s fifth-biggest economy grappling with a particularly unhealthy cocktail of slowing growth and surging inflation, the British currency has become the medium of choice to express a negative view. Official data on Wednesday showed inflation reached a 40-year high of 9% in April – more than four times the Bank of England’s 2% target while Britain’s worst cost of living crisis in three decades will not subside until late this year, according ...

USD: The cavalry ain’t coming Yesterday saw the S&P 500 sell off 4%, led by consumer stocks. The fact that some of the biggest main street names are under pressure on the back of profit warnings is a reminder that the squeeze on real incomes is starting to hit home. Over prior decades, decades associated with very dovish Fed policy, one might have expected this magnitude of an equity market sell-off to put a dent in Fed tightening expectations – or expectations that the Fed would come to the equity ...

The euro edged up on Thursday as investors price in the chance of an aggressive near-term tightening path by the European Central Bank, while the safe-haven dollar took a breather after significant gains in the previous sessions. Money markets are currently pricing in 106 basis points (bps) of ECB rate hikes from around 95 bps on Tuesday before ECB official Klaas Knot signalled a 50-basis-point rate increase was possible in July. U.S. money markets, meanwhile, are still discounting around 200 bps of Fed rate hikes by December 2022. Risk appetite ...

USD: Don’t forget the rate and growth factor The rebound in global equities has continued to fuel a recovery in pro-cyclical currencies, and a correction in the safe-haven US dollar and Japanese yen. Overnight, Asian equities were mixed, and the CSI300 failed to follow yesterday’s jump in US-traded Chinese tech stocks following some unusually supportive comments for China’s tech companies from one of Beijing’s top officials, which fuelled speculation of some easing in the current crackdown. Stock index futures suggest a flat open in major Western equity markets today. Clearly, ...

The U.S. dollar bounced back on Wednesday, a day after its biggest daily loss in more than two months, as U.S. Federal Reserve chief Jerome Powell struck a more hawkish tone as the central bank battles to rein in surging inflation. Powell pledged that the U.S. central bank would ratchet up interest rates as high as needed, including taking rates above neutral, to kill a surge in inflation that he said threatened the foundation of the economy. The neutral rate is the level at which economic activity is neither simulated ...

Being long dollars will no doubt become an overcrowded trade at some point and a reversal will ensue, but for hedge funds right now, there is no alternative. Funds have amassed their biggest bet in six months that the dollar will strengthen against the world’s major currencies, and you can understand why. From widening interest rate and yield spreads, favorable relative growth prospects, and safe-haven flows amid exploding equity- and crypto-fueled market volatility, there are many factors behind the greenback’s ascent to a 20-year peak. The latest Commodity Futures Trading ...

USD: April retail sales should keep dollar supported After quite a month in financial markets which saw global equity markets fall 15% and USD/CNY spike 6%, it seems like we are entering a period of consolidation. At the epicentre of that unease has been China, where lockdowns have seen Chinese and global growth forecasts cut. The lockdown strategy by Chinese authorities seems unlikely to change anytime soon, but there is some very short-term optimism that the residents and workers of Shanghai might be released after three days without a new ...

The dollar eased for a third straight day on Tuesday as investors cautiously trimmed bets on a rally which sent the greenback to a two-decade high last week. The currency’s strength is widely expected to remain a driving force across financial markets in 2022 as the U.S. Federal Reserve implements a new cycle of monetary tightening. Fed speakers on Tuesday, including Chairman Jerome Powell at 1800 GMT, will be closely watched for any clues about whether near-term rate expectations could become even more aggressive. The U.S. currency’s breather pushed the ...

The European Central Bank may kick off the development of its digital euro, an electronic version of banknotes and coins, by the end of next year, ECB board member Fabio Panetta said on Monday. “Finally, at the end of 2023 we could decide to start a realisation phase to develop and test the appropriate technical solutions and business arrangements necessary to provide a digital euro,” Panetta said. “This phase could take three years.” Source: Reuters (Reporting By Francesco Canepa; Editing by Toby Chopra)

USD: All about risk sentiment Risk assets are desperately seeking some stabilisation after seven consecutive weeks of losses in US equities and exacerbating market concerns over the combination of a global economic slowdown and monetary tightening. Asian equities are mixed this morning, while futures point to another negative open for most European and US stock indices today. In the FX market, the main implication of this period of risk instability has been a weakening of the link between short-term rate differentials and currency dynamics, as the liquidity factor (Norway’s krone, ...

The U.S. dollar consolidated gains near a two-decade peak on Monday as poor Chinese economic data hurt cyclical currencies including the British pound and the Australian dollar lower. While expectations of a hawkish Federal Reserve have been instrumental in fuelling a dollar rally that has seen a broad index gain nearly 10% so far this year, the latest episode of dollar gains has been driven by extended lockdowns in China. China’s retail and factory activity fell sharply in April as wide COVID-19 lockdowns confined workers and consumers to their homes.. ...

The International Monetary Fund (IMF) has raised the weighting of the Chinese yuan in the Special Drawing Right (SDR) currency basket, according to a press release on Saturday. In its latest SDR valuation review completed on Wednesday, the organization raised the yuan’s weighting to 12.28 percent from 10.92 percent and the U.S. dollar’s weighting from 41.73 percent to 43.38 percent. The other three currencies in the basket, the euro, Japanese yen and British pound, had their weightings reduced. The SDR is an international reserve asset to supplement the official reserves ...