Forex
Dollar stabilizes near recent highs; sterling gains on strong PMI data
![](https://letizo.com/wp-content/uploads/2024/04/dollar-stabilizes-near-recent-highs-sterling-gains-onstrong-pmi-data_660c1e1b7d6a3.jpeg)
Investing.com – The U.S. dollar stabilized near its recent over four-month high in European trade Tuesday as strong economic data hit expectations of early rate cuts by the Federal Reserve.
At 05:40 ET (10:40 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely unchanged at 104.755, just below the previous session’s 105.07 top, its highest level since the middle of November last year.
Dollar boosted by reduced rate cut expectations
The greenback received a boost Monday after data showed the first expansion in U.S. manufacturing since September 2022.
Further signs of U.S. economic strength has resulted in traders reining in expectations of early interest rate cuts by the Federal Reserve, supporting the dollar.
The CME’s FedWatch tool now factors in 61.3% odds of a Fed rate cut in June, down from about 70.1% probability a week ago.
There is more economic data to digest Tuesday, including and , both for February, ahead of Friday’s widely-watched payrolls report for March.
“Looking ahead, this week features a myriad of Fed speakers. Given the direction of travel of the U.S. data recently, it seems hard to expect any renewed dovishness on their side,“ said analysts at ING, in a note.
“Markets expect a slightly lower JOLTS job opening figure today,” ING added, “we see this data as a potential market mover which, if soft, could reverse some of the dollar gains seen late last week.”
Sterling gains on strong manufacturing data
In Europe, fell 0.1% to 1.0738, dropping after eurozone manufacturing activity took a further turn for the worse in March, contracting at a steeper pace than in February.
HCOB’s final , compiled by S&P Global, dipped to 46.1 in March from February’s 46.5, beating a preliminary estimate of 45.7, but staying below the 50 mark denoting growth in activity for a 21st month.
“Two-year EUR:USD swap rate differentials are now at 145bp in favor of the dollar. These are the most supportive rate conditions for the dollar since December 2022,” ING said. “No wonder EUR/USD is comfortably trading under 1.0800. The 1.0695/1.0700 lows seen in mid-February are now an obvious short-term target.”
rose 0.2% to 1.2569, bouncing after recent losses after British manufacturers reported their first overall growth in activity in 20 months in March, suggesting last year’s shallow recession has ended.
The S&P Global/CIPS rose to 50.3, higher than a preliminary March reading of 49.9 and up from February’s 47.5. The last time this index was above the 50 threshold for growth was in July 2022.
Yen remains on intervention watch
traded 0.1% higher at 151.68, just below the 151.80 level seen earlier in the session, the weakest level since it reached a 34-year trough of 151.975 last week.
Finance Minister Shunichi Suzuki reiterated earlier Tuesday that he wouldn’t rule out any options to respond to disorderly currency moves.
Japanese authorities entered the currency market three times in 2022, selling the dollar to buy yen, first in September and again in October as the yen slid towards 152 to the dollar.
rose 0.1% to 7.2358, with the yuan falling to a 4-1/2-month low against the dollar, offsetting selling of the U.S. currency by state-owned banks.
Forex
Major Russian lenders say yuan coffers empty, urge central bank action
![](https://letizo.com/wp-content/uploads/2024/09/major-russian-lenders-say-yuan-coffers-empty-urge-centralbank-action_66dc6b1523127.jpeg)
By Elena Fabrichnaya
MOSCOW (Reuters) – Major Russian banks have called on the central bank to take action to counter a yuan liquidity deficit, which has led to the rouble tumbling to its lowest level since April against the Chinese currency and driven yuan swap rates into triple digits.
The rouble fell by almost 5% against the yuan on Sept. 4 on the Moscow Stock Exchange (MOEX) after the finance ministry’s plans for forex interventions implied that the central bank’s daily yuan sales would plunge in the coming month to the equivalent of $200 million.
The central bank had been selling $7.3 billion worth of yuan per day during the past month. The plunge coincided with oil giant Rosneft’s 15 billion yuan bond placement, which also sapped liquidity from the market.
“We cannot lend in yuan because we have nothing to cover our foreign currency positions with,” said Sberbank CEO German Gref, stressing that the central bank needed to participate more actively in the market.
The yuan has become the most traded foreign currency on MOEX after Western sanctions halted exchange trade in dollars and euros, with many banks developing yuan-denominated products for their clients.
Yuan liquidity is mainly provided by the central bank through daily sales and one-day yuan swaps, as well as through currency sales by exporting companies.
Chinese banks in Russia, meanwhile, are avoiding currency trading for fear of secondary Western sanctions.
At the start of September, banks raised a record 35 billion yuan from the central bank through its one-day swaps.
“I think the central bank can do something. They hopefully understand the need to increase the liquidity offer through swaps,” said Andrei Kostin, CEO of second-largest lender VTB, stressing that exporters should sell more yuan as well.
The acute yuan shortage also follows months of delays in payments for trade with Russia by Chinese banks, which have grown wary of dealing with Russia after U.S. threats of secondary Western sanctions. These problems culminated in August in billions of yuan being stuck in limbo.
Russia and China have been discussing a joint system for bilateral payments, but no breakthrough is in sight. VTB’s Kostin said that since Russia’s trade with China was balanced, establishing a clearing mechanism for payments in national currencies should not be a problem.
Forex
Bank of America sees more downside for the dollar
![](https://letizo.com/wp-content/uploads/2024/09/bank-of-america-sees-more-downside-for-the-dollar_66dc6b1b4bb7b.jpeg)
Investing,com – The US dollar has stabilized after a sharp fall in August, but Bank of America Securities sees more troubles ahead for the US currency.
At 07:20 ET (11:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 101.077, having largely held its course over the last week.
That said, the US currency is still down 1.6% over the month.
The dollar’s selloff last month stood out in a historical context, according to analysts at Bank of America Securities, in a note dated Sept. 5.
The greenback has since stabilized, however, despite the outsized weakness, the US bank still sees three reasons to stay bearish on the Dollar Index (DXY).
Following similar episodes of bearish DXY breakouts, the index has tended to continue its downtrend, the bank said.
In the last 3 analogs, DXY index fell on average for another 4% before reaching a bottom. Extending this analysis to bilateral USD/G10 pairs suggests a continuation of the USD downtrend is more likely vs EUR, GBP, and AUD than SEK, NOK, and CHF in G10.
While the DXY made a new year-to-date low in August, broad nominal and real USD trade-weighted indices have stayed at Q4 2022 levels and would suggest the USD remains overvalued.
The USD selloff in 2024 has been concentrated in and other European currencies, leading to DXY divergence from other USD indices.
The bank also noted US 10y Treasury yield’s tendency to fall after the first Federal Reserve cut, while global financial conditions are set to loosen further.
“USD may see more weakness as other central banks, particularly the ones that cut policy rates ahead of the Fed, can now afford to let the Fed do some of their work and indirectly support global economies outside of the US,” BoA added.
Forex
Dollar’s demise appears overstated – JPMorgan
![](https://letizo.com/wp-content/uploads/2024/09/dollars-demise-appears-overstated-jpmorgan_66dc6b208bdf2.jpeg)
Investing.com – The US dollar has had a difficult summer, dropping substantially during the month of August, but JPMorgan thinks those predicting the demise of the U.S. currency are getting ahead of themselves.
At 06:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 101.127, having lost 1.6% over the course of the last month.
“Diversification away from the dollar is a growing trend,” said analysts at JPMorgan, in a note dated Sept. 4, “but we find that the factors that support dollar dominance remain well-entrenched and structural in nature.”
The dollar’s role in global finance and its economic and financial stability implications are supported by deep and liquid capital markets, rule of law and predictable legal systems, commitment to a free-floating regime, and smooth functioning of the financial system for USD liquidity and institutional transparency, the bank added.
Additionally, the genuine confidence of the private sector in the dollar as a store of value seems uncontested, and the dollar remains the most widely used currency across a variety of metrics.
That said, “we are witnessing greater diversification and important shifts in cross-border transactions as a result of sanctions against Russia, China’s efforts to bolster usage of the RMB, and geoeconomic fragmentation,” JPMorgan said.
The more important and underappreciated risk, the bank added, is the increased focus on payments autonomy and the desire to develop alternative financial systems and payments mechanisms that do not rely on the US dollar.
“De-dollarization risks appear exaggerated, but cross-border flows are dramatically transforming within trading blocs and commodity markets, along with a rise in alternative financial architecture for global payments,” JPMorgan said.
- Forex2 years ago
Forex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week
- Forex2 years ago
How is the Australian dollar doing today?
- Forex2 years ago
Dollar to pound sterling exchange rate today: Pound plummeted to its lowest since 1985
- Forex2 years ago
Unbiased review of Pocket Option broker
- Cryptocurrency2 years ago
What happened in the crypto market – current events today
- World2 years ago
Why are modern video games an art form?
- Stock Markets2 years ago
Morgan Stanley: bear market rally to continue
- Commodities2 years ago
Copper continues to fall in price on expectations of lower demand in China