Demand for U.S. dollars in the currency derivative markets surged on Friday to its highest since the COVID-19 crisis in 2020 as market turmoil sent investors hunting for cash at the end of one of the most volatile quarters in decades. The three months to September have seen central banks step up their fight against inflation with aggressive interest rate rises, mopping up the cheap cash in the system that built up during the pandemic. Asset managers hold more cash on their balance sheets than at any time since 2012, ...

USD: Quarter-end flows and position adjustments FX volatility remains at its highs for the year and could extend even higher. We see two clear drivers here. The first is the continued tightening of monetary policy by central bankers around the world in an effort to prevent the current high levels of inflation from becoming pervasive in their economies. Leading the charge in this regard is the Federal Reserve. Today sees the August release of one of the Fed’s preferred measures of inflation – core PCE. This is expected to rise ...

The euro dropped on Friday after inflation in the euro zone hit a record high, but headed for a weekly gain on hawkish signals from the European Central Bank as some calm returned to foreign exchange markets at the end of a wild week. Sterling was also lower as end-of-quarter demand boosted the dollar, but was headed for its best week against the U.S. currency in 2 1/2 years as the BoE waded into the debt market to buy gilts for a second day on Thursday. On Monday, the pound ...

Emerging Asian currencies inched higher on Friday as the U.S. dollar remained subdued, with the Chinese yuan firming after a report that the country’s major state banks were told to stock up the yuan to stem its descent against the greenback. Reuters reported that the People’s Bank of China (PBoC) had instructed state banks to ask their offshore branches to review their holdings of the offshore yuan CNH=D3 and ensure U.S. dollar reserves were ready to be deployed, the scale of which could be rather big. The yuan CNY=CFXS reversed ...

Perhaps remarkably, some of the world’s major economies still hold at least part of their rainy-day savings in sterling and British government bonds – raising questions about whether long instability in both will keep them doing so. A pound plummeting to record lows and an illiquid and sometimes unstable gilt market has sent shockwaves around global markets since late last week – adding credence to recent fears that Britain, still the world’s 6th biggest economy in the world, risked a balance of payments crisis on current policy trajectories. The decision ...

Most emerging Asian currencies weakened against a stronger U.S. dollar on Thursday, with Thailand’s baht shedding more than 1% following a quarter-point rate hike that investors viewed as moderate to bring down inflation running at a 14-year high. Thailand’s central bank chief said the bank was ready to adjust the pace of tightening monetary policy if needed and would be prepared to hold an off-cycle meeting if necessary. The comments came a day after the Bank of Thailand (BOT) hiked its key interest rate by 25 basis points (bps) to ...

India’s depleted foreign exchange reserves are likely to drop further, falling to their lowest level in over two years by end-2022, as the Reserve Bank of India continues to defend the rupee from the mighty dollar’s rise, a Reuters poll found. In a battle that has so far failed to staunch the rupee’s fall to a record low against the greenback, the RBI has drawn down its foreign exchange reserves by nearly $100 billion to $545 billion from a peak of $642 billion a year ago, and more is coming. ...

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. ...