The dollar hit a fresh one-month low on Tuesday as the euro extended gains while a broad selloff in stock markets failed to boost the U.S. currency’s safe haven appeal. Against a basket of its rivals =USD, the dollar fell 0.3% to 101.79, its lowest level since April 26. The euro EUR=EBS, which was the stand-out gainer on Monday after European Central Bank President Christine Lagarde indicated negative interest rates, a euro zone feature for eight years, will most likely be gone by the end of summer, extended gains. The ...

USD: Still feeling the long squeeze European stocks are higher and US equity futures are pointing to a positive start to the week, as global risk sentiment continues to drive the majority of FX moves amid strong volatility. This morning, the Australian and New Zealand dollars are leading the rally against the dollar on the back of risk-on sentiment and yet another strong day for the Chinese yuan. Reports that President Biden is considering lifting some of the tariffs on China are also helping. We doubt the Australian election had ...

Asian currencies overcame early market Asian FX edges higher as dollar weakens on China growth hopes pressure to edge higher against a tepid U.S. dollar on Monday, while the Singaporean dollar rose to a 2-1/2-week high after data showed the city-state witnessed its fastest rise in core inflation in a decade. South Korea’s won and the Taiwanese dollar rose 0.3% and 0.1%, respectively, while the Thai baht and Philippine peso traded flat. The dollar weakened against major currencies, following its first weekly loss in nearly two months, as investors cut ...

China’s foreign exchange regulator said on Friday it would offer new derivatives tools to help companies better hedge their currency risks, after recent huge volatility in the Chinese yuan. The State Administration of Foreign Exchange (SAFE) will also make it easier for banks to conduct forex derivative business and encourage lenders to better manage forex risks themselves, according to a notice on SAFE’s website. The announcement is designed to “further enhance the depth and breadth of China’s forex market, and help market participants better manage currency risks,” SAFE’s deputy chief ...

USD: Some consolidation is in order The dollar is now about 2% off its highs seen late last week. Driving that move has probably been some position liquidation and a preference for currencies like the Japanese yen (JPY) and the Swiss franc (CHF) during turbulent times in global equity markets. In fact, yesterday’s FX activity looked like the big sell-off in EUR/CHF on Swiss National Bank (SNB) comments which triggered downside stops in USD/CHF and prompted a slightly broader dollar adjustment. Also helping this period of consolidation has been this ...

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 ...