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Daily Currencies Ratings

Euro most resilient to climate change, yuan most exposed – Barclays

Climate change could play out to the advantage of the euro, while China’s yuan and the Japanese yen are set to suffer the most without greater efforts to mitigate the effects of global warming, Barclays (LON:BARC) said in a report. The British bank mapped the effects of climate change on exchange rates, saying rising temperatures and associated economic costs could pose “rising and costly risk, with tangible FX impact”. In the bank’s most severe scenario, the euro is the outperformer, appreciating 0.5% against the dollar by 2030 and 3.9% on ...

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FX Daily: The moment of truth

USD: 75bp by the Fed today We approach FOMC day with a deeply changed picture in global markets and rate expectations compared to a week ago. Investors have now fully aligned with the view that the Fed will hike by 75bp today, following the unexpected acceleration in CPI and inflation expectations in May and media reports suggesting the option was being discussed by policymakers. While a 75bp move is not certain, we doubt such potential “leaks” to the media are a coincidence, and they do appear to us as a ...

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International use of the euro remained stable in 2021

The international role of the euro remained stable in 2021, with its share across various indicators of international currency use averaging around 19%. This was one of the main findings in the annual review of The international role of the euro published today by the European Central Bank (ECB). “Following the pandemic, the euro area has experienced one of the steepest recoveries in its history, thanks also to ample fiscal and monetary policy support. Now we face rising global inflation driven by higher energy costs, supply bottlenecks and normalising demand ...

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Euro jumps on unscheduled ECB meeting, dollar awaits Fed move

The euro jumped after the ECB’s governing council said it would hold an emergency meeting on Wednesday to discuss the recent sell-off in government bond markets, briefly distracting traders ahead of a much-watched Fed meeting. The European common currency rose as much as 0.7% against the dollar to $1.04945, following the announcement of the meeting, which comes after the spread between the yields of Germany and more indebted southern nations, particularly Italy, soared to its highest in over two years. Italy’s 10-year bond yield slid 20 basis points to 4%, ...

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FX Daily: All in on 75bp bets

USD: 75bp in the bank, now 100bp? Inflation fears continued to rock equities yesterday, sending the S&P 500 into bear market territory and generating another flight to safety in global markets. This morning, European and US stock futures are trading in the green, signalling a potential pause in the sell-off after three terrible days for risk assets. In FX, the dollar has emerged as the clear winner in the current environment, trading somewhere between 2.1% and 4.7% higher against G10 currencies compared to last Tuesday. In periods of rapidly deteriorating ...

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Dollar pauses near 20-year highs after historic bond rout

The U.S. dollar consolidated gains near a 20-year peak on Tuesday while its rivals from the Aussie to the euro nursed steep losses as traders braced for aggressive interest rate hikes from the Federal Reserve this week. Expectations for a 75 basis-point increase at the conclusion of a two-day meeting on Wednesday are nearly baked into prices, according to CME’s Fedwatch Tool with investment banks like Goldman Sachs (NYSE:GS) expecting a 75 basis-point rate hike in June and July, and a 50 basis-point rise in September. A 75 basis-point increase ...

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FX Daily: ‘More forceful’ tightening keeps risk assets pressured

USD: So much for the Fed pause As above, one is starting to hear of the need for ‘more forceful’ monetary tightening around the world now. Banxico used this phrase in May as it prepares to shift to 75bp from 50bp increment in rate hikes. The Reserve Bank of New Zealand has used the same phrase this week and the Bank of Canada governor expressed the same sentiment yesterday. We have not heard from the Federal Reserve recently because of the blackout period ahead of next week’s FOMC meeting, but ...

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Japanese yen jumps after authorities sound intervention warning

The Japanese yen jumped on Friday after the government and the central bank in a rare joint statement expressed concern about the yen’s recent slide to hit two-decade lows. After a meeting with his Bank of Japan (BOJ) counterpart, the country’s top currency diplomat Masato Kanda told reporters that Tokyo will take appropriate action as needed, a sign Japan may be edging closer to intervening in the market in a bid to arrest the yen’s declines. Japan’s yen has been battered by traders wagering that the BOJ will stick with ...

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IMF says yen’s recent ‘significant’ fall reflects fundamentals

The yen’s recent “significant” depreciation reflects fundamentals, such as market expectations of differing monetary policy paths between Japan and the United States, a senior International Monetary Fund (IMF) official said on Thursday (Jun 9). Ranil Salgado, the IMF’s Japan mission chief, said the yen’s recent moves against the dollar had been strongly correlated with Japan-US interest-rate differentials. Rising global raw material prices had also weighed on the yen, because Japan, a major commodity importer, must pay more dollars, he said. “We believe that the yen’s movements reflect fundamentals,” Salgado told ...

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ECB hawkishness not enough to lift the euro right now

The positive reaction in EUR/USD after the ECB signalled openness to a 50bp rate hike in September (while formally announcing a 25bp one in July) was exceptionally short-lived. Probably, a key reason behind the reversal of the EUR/USD spike during President Lagarde’s press conference has been the underperformance of other assets the EUR tends to be linked to in the short term. The 10-year BTP-Bund spread has widened by approximately 15bp since the announcement, and eurozone equities are underperforming US ones by around 1.20% today. Incidentally, the market’s general sentiment ...

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FX Daily: Talking up the euro

USD: Biding its time near the highs There is a complex layer of stories at play in FX markets at present. Risk assets have temporarily stabilised and US activity data is holding up such that investors remain happy to price a Fed terminal rate up at 3.25% next year. This is keeping the dollar generally strong. Yet, the hawkish turn from the European Central Bank and others over the last month has provided some support to European currencies – even though those currencies are challenged by surging energy prices on ...

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Euro holds near 7-1/2-year high vs yen before ECB decision time

The euro held near its highest point in 7-1/2 years versus Japan’s yen on Thursday before a potentially pivotal European Central Bank rate decision, with policymakers expected to announce an end to the bank’s multi-year monetary stimulus. The ECB is all but certain to flag an end to its long-running asset purchase programme at the end of this month, and promise an interest rate hike for July, but the size and pace of its tightening are uncertain. A hawkish Federal Reserve and soaring inflation has upped the pressure on Frankfurt ...

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Euro hits 7-year peak vs yen ahead of ECB announcement

The euro hit a seven-year peak against the yen on Wednesday ahead of a European Central Bank (ECB) rate-setting meeting on Thursday that is likely to leave the Bank of Japan (BoJ) standing alone with ultra-loose monetary policy. The yen has now fallen for 10 consecutive trading sessions against the euro, its longest losing streak in eight months, and reached a seven-year low of 142.84 per euro in early European trade. The euro slipped 0.1% against a broadly stronger dollar to $1.06885, leaving it within recent ranges ahead of the ...

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FX Daily: Overestimating the Johnson effect

USD: Yen underperformance in focus Global risk sentiment started to weaken yesterday during the US trading session and stock indices have opened lower across Western markets today. Let’s see whether this triggers some recovery in the bond market, after another material correction higher in yields yesterday has once again proven to be narrowly dollar-positive. The yen remains the major victim in the higher-yield environment, with USD/JPY breaking fresh two-decade highs and currently trading close to the 133.00 mark. At a time when the prospect of Fed tightening is a major ...

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Dollar hits 2-decade high vs yen, pound near 3-week low

The U.S. dollar rose to a two-week high as rising U.S. Treasury yields supported the greenback, pushing the Japanese yen to its lowest level against the dollar in two decades. The yen dropped to a 20-year low of 133 per dollar, levels that had previously been highlighted as intervention territory, a day after central bank governor Haruhiko Kuroda reiterated an unwavering commitment to “powerful” monetary stimulus. The yen is sensitive to interest rate differentials between Japanese debt and U.S. bonds. Benchmark 10-year Treasury yields had climbed as high as 3.064% ...

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