Archives of “united states dollar” tag

rss

Has the dollar lost its grip on the iron throne?

  
  Analysis
#  #  #  #  #  #  #  #  #  #  #

What is next for the dollar?

FXTM
If one could describe the Dollar’s performance over the past few months in one word, the best fit would be vulnerable.

The once king of the FX space has weakened considerably in Q3, depreciating against every single G10, most Asian and emerging market currencies. This is despite its safe-haven status and the global reserve currency title. For those who are wondering why the Greenback remains depressed and unable to shake away the blues despite the general uncertainty, the first clues can be found in the US economy. (more…)

Laura expected to make landfall in about 12 hours as Category 4 hurricane

  
  Analysis
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

The latest from the NHC forecast

The latest from the NHC forecast on Laura
The US National Hurricane Center is out with its latest update on Hurricane Laura and it’s not good.
Laura is likely to continue strengthening today while it moves over warm waters of the northwestern Gulf of Mexico and the vertical wind shear remains low. Laura’s intensity could level-off by this evening due to the possibility of an eyewall replacement cycle and the expected increase in shear around the time of landfall. Even if the rate of strengthening eases, Laura is expected to be an extremely powerful category 4 hurricane when it reaches the northwestern Gulf coast.
This has the potential to be especially devastating for the oil & gas industry and its workers. The current track takes the eye through or near Beaumont, TX or Lake Charles, LA. Both are massive US refining hubs. The Houston area will also be hit but it now looks like the worst of the storm will pass to the east of it.
Category 4 hurricanes have sustained winds in the 209-251 km/h range, or 130-156 mph. Storm surges are generally 13-18 feet but can be as much as 24 feet. The NHC says the storm surge from Laura could penetrate 30 miles inland.
A recent Category 4 storm was Hurricane Harvey in 2017. It inflicted an estimated $125B in damage as it first made landfall near Corpus Christi and then raked the coast, causing widespread flooding in Houston. It matched Katrina as the most-costly US hurricane.
This storm appears to be faster moving so flood damage may not be as high but wind damage could be worse. It will also then cut across the mid-Atlantic states and could reform as a tropical storm off the coast of North Carolina or Virginia.

China repeats that it firmly opposes US’ suppression of Huawei

  
  Analysis
#  #  #  #  #  #  #  #

Comments by the Chinese foreign ministry

Huawei

This comes after the US moved to cut off Huawei’s supply chain via fresh sanctions that will restrict any foreign semiconductor company from selling chips – developed or produced using US software/technology – to the Chinese company.

The remarks from China today are rather reserved – no specific mention of retaliation but there is anxiety surrounding the situation – but fitting with the tone that both sides are still largely holding off from escalating tensions too much for the time being.

Why the US dollar continues to fall

  
  Analysis
#  #  #  #  #  #  #

USD/JPY declines below 106.00

USD/JPY is at a six-day low as the pressure on the US dollar mounts. There is some broad-based weakness taking hold. It’s increasingly becoming the default mode in the market to sell US dollars, so long as there isn’t genuine risk aversion.
There’s nothing particularly negative for the US dollar today but there are headwinds:
  1. US election risk
  2. Lack of US stimulus will hurt relative growth
  3. Equity market valuation is richer in the US, better value elsewhere
  4. Long-term monetization/inflation worries
Here’s chart on M2 from Nordea comparing the US and Europe:
USD/JPY declines below 106.00
In the smaller picture, risk sentiment is good today and that’s good enough to undercut the US dollar.
As for USD/JPY, it’s not time to worry yet but the drop in late July is starting to look like a warning shot.
USDJPY

Here’s what it’ll take for gold (and silver) to climb to new highs ($2100, $30)

  
  Analysis
#  #  #  #  #  #  #
  • Real rates are now rising along with nominal yields due to stimulus optimism and risk appetite, with the USD also off its lows. 
  • Given that the US economy will continue to positively respond to an additional trillion dollars worth of fiscal stimulus and continued Fed measures, it is quite likely that rates and the dollar may see some better days into 2020. 
  • This, along with profit-taking by the very active retail investors and COMEX margin increases should see gold consolidate lower.
  • Before … new highs ($2,100+, $30+), there will need to be confirmation that the Fed will indeed suppress yields, consider average inflation targeting and there are signs that inflation may move higher
  • At the same time, markets will want to see if monetization of debt is in the cards, before talk of these levels becoming sustained is credible. 
  • TD securities projects an average gold price of $2,100/oz in Q4-2021 and $30/oz silver price during the same period

Are climbing bond yields about supply or demand?

  
  Analysis
#  #  #  #  #  #  #  #

US Treasury yields climb ahead of auctions

US Treasury yields climb ahead of auctions
It’s a big week in the Treasury market with record-high sales starting with three-year notes today.
With that, Treasury yields have jumped higher. US 10-year notes are up 6.4 bps to 0.6415% today. That’s after hitting a low of 0.5036% last week. The turn in the market came on the refunding announcement as coupon-issues were upsized and now we’re left to ponder what the latest move means.
The optimistic take is that this signals improvement on the virus and the economy. The other side of the argument is that a flood of bonds is going to push up rates.
I’m more sympathetic to the optimistic side, if only because Trump’s executive orders mean that more stimulus spending is less likely and will probably be lower. At the same time, a capital gains cut would blow another hole in the budget.
What does it mean for the US dollar? It’s positive.
BMO today highlights that even at 0.16%, US three-year notes are relatively attractive.
While the past few sessions’ concession will aid the takedown of this afternoon’s offering, at just 16 bp, 3-year yields are not abundantly cheap on an outright basis. However, when compared to overseas yields that have pushed to extremely negative territory, there is an argument to be made that the still-positive nominal rate on Treasuries will increasingly drive foreign interest.
At the same time, they see this latest move as more about supply than a ‘fundamental rethink’ of the econoy.
So the overall message from bonds right now is murky and it’s risky to take any big signals in mid-August.

US dollar dips after Trump talks about payroll tax cut order

  
  Analysis
#  #  #  #  #  #

Trump says executive order coming on a payroll tax cut and eviction protections

Trump says executive order coming on a payroll tax cut and eviction protections
Trump can delay the collection or payroll taxes and he can ban evictions for a time, but eventually those payments will come due. The idea may be that the end of the deferral will put pressure on Congress to waive it but it could also result it a bit of a payment cliff.
This was rumored and hinted at for more than a week so I’m not sure this is what’s moving the dollar at the moment but it’s something to watch. The larger theme of relentlessly rising US deficits is one that’s going to last years, not months.

USD weakening further into Asia morning FX trade

  
Analysis, Forex
#  #  #  #  #  #  #

The overnight (and past weeks!) USD weakness is carrying over into early Asia

Its heading towards 8.30am in Tokyo and 7.30 in Singapore and Hong Kong
Across the board USD weakness, although CAD is a laggard.
Apart from what I have been posting there is no fresh news.

US dollar catches an early bid on Fed day

  
Analysis, Forex
#  #  #  #  #  #  #  #

USD/JPY pops

Short-term speculators are no-doubt short the US dollar so some position squaring early today into the FOMC decision make sense. We’re also closing in on month-end so flow driven trades are going to be a factor.
The Fed decision is at 1800 GMT with Powell 30 minutes later. I’ll be looking for commentary on the economy as the top market mover. If it’s negative, the Fed will have to offer more strong hints at easing to keep the equity babies bulls at bay.
Other economic data today is a mish-mash of second tier data including:
  • US trade balance (advance goods)
  • Wholesale inventories
  • Pending home sales
  • Weekly oil inventories.

Goldman Sachs says real concerns about USD as reserve currency. Barclays says No.

  
Analysis, Forex
#  #  #  #  #  #  #

GS is alarmed, says “Real concerns about the future of the US Dollar as the world’s reserve currency have started to emerge.”

Barclays says nope, the US “isn’t anywhere close to losing its reserve currency status”. Barclays cite:
  • “depth of capital markets and overwhelming volume of USD denominated global transactions” 

On the recent decline in the dollar:

  • “Reserve managers and investors have spent the better part of the last few years accumulating USD assets and with the recent developments, simply find it prudent to diversify into less USD denominated exposures” 

Barclays comments via Bloomberg.

I’m with Barclays on this one.
GS is alarmed, says "Real concerns about the future of the US Dollar as the world'sreserve currency have started to emerge."
Go to top