Creating an official digital version of the U.S. dollar could help ensure financial system stability as crypo-assets and digital currencies developed by other countries become increasingly popular, Federal Reserve Vice Chair Lael Brainard said on Wednesday. “As we assess the future digital financial system, it is prudent to consider how to preserve ready public access to safe central bank money, perhaps through the digital analogue of the Federal Reserve’s issuance of physical currency,” Brainard said in testimony released in advance of her appearance on the issue before the U.S. House ...

Second-guessing the US policy agenda Correctly second-guessing the Trump policy agenda would have paid off handsomely over the past two years. A relatively quiet first year in office for Trump (2017) saw global recovery stories come through and a benign decline in the dollar. This second year of Trump’s presidency has seen Washington come out fighting on trade, insulated by January’s US$1.5trn fiscal stimulus. This put paid to notions of a synchronised global recovery and a weaker dollar. Hats off to the US Administration for the timing of their protectionist ...

The dollar’s rally to two-decade highs appears to have stalled, with doubts growing on whether the U.S. economy will prove as resilient and monetary policy as aggressive as previously expected. After climbing 10% in three months, the greenback has slipped 3% =USD since May 13. Some reckon that’s because the safe-haven bid sparked by the Russia-Ukraine war has now ebbed. Others say that if the Federal Reserve were to tighten monetary policy significantly it would risk propelling the U.S. economy into recession. And finally, while U.S. rate hikes will still ...

The dollar hovered near a one-month low on Thursday as minutes from the Federal Reserve’s May meeting confirmed the potential for a pause in rate hikes after likely further increases in June and July. The dollar index =USD – which measures the currency against six major peers – edged 0.1% higher to 102.15 as a decline in Asian equities fostered demand for safe havens like the greenback. However, the index has mostly been consolidating around 102 after a short-lived bounce to 102.45 immediately following Wednesday’s release of the minutes. Analysts ...

USD: Risk sentiment remains the primary driver, but downside risks are smaller now The shockwaves that originated from the slump in US tech stocks yesterday seem to have been absorbed without too much trouble by global equity markets, although more signs of sentiment instability did take some steam off the rally in pro-cyclical currencies. The dollar has found some stabilisation after a negative start to the week and should, for now, continue to trade primarily in line with swings in global risk sentiment. Yesterday, new home sales in the US ...

In recent days, ECB officials have become more vocal with their concerns about the weak euro. French central bank governor, Villeroy de Galhau, pointed out that a weaker euro would undermine the ECB’s goal of price stability. ECB executive board member, Isabel Schnabel, was quoted saying that the ECB was closely monitoring the impact of the weaker euro on inflation. This is in stark contrast with the minutes of the ECB meeting in April when the exchange rate was only mentioned four times. There was also market speculation that major ...

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 ...