Forex
Dollar edges up ahead of key data, Bank of Canada policy meeting
![](https://letizo.com/wp-content/uploads/2024/06/dollar-edges-up-ahead-of-key-data-bank-of-canada-policymeeting_66607e10bfb67.jpeg)
By Stefano Rebaudo
(Reuters) -The dollar rose ahead of key U.S. economic data on Wednesday, with investors also waiting for a monetary policy meeting in Canada that could set off a rate cutting cycle.
Investors are looking out for U.S. services data on Wednesday, and more job figures later in the week.
The greenback has languished at an almost two-month low as signs of a softening U.S. economy on Monday boosted the case for earlier Federal Reserve interest rate cuts.
The Bank of Canada gathers a day ahead of a European Central Bank meeting on Thursday.
Canada’s annual inflation rate slowed to a three-year low of 2.7% in April, prompting money markets to see an increased chance of an interest rate cut this month.
Markets price about an 80% chance of a Canadian rate cut on Wednesday and discount 65 basis points (bps) of policy easing by year-end.
“We think the Bank of Canada is overdue, and a dovish pivot will have a read-across among smaller G10 countries, such as New Zealand,” said Themos Fiotakis, global head of forex strategy at Barclays.
The Canadian dollar hugged the middle of a months-long range at C$1.3683 per dollar.
The rose 0.19% to 104.36. It hit 103.99 on Tuesday, its lowest level since April 9.
“The main point is that markets are pricing the Fed to cut rates almost as much as the ECB,” Barclays’ Fiotakis said.
“The divergence in the fundamentals is not priced. However, the growth and inflation dynamics will make the Fed much less dovish than other central banks,” he added, arguing he sees an opportunity for investors to go long dollars.
Markets were also closely watching futures, which hovered near four-month lows on Wednesday.
“If low oil prices cause disinflation to become a global phenomenon again, we wouldn’t expect more policy divergence, nor a weaker dollar, as this would trigger ‘dovishness’ everywhere,” said Thierry Wizman, global forex strategist at Macquarie.
The euro was down 0.1% at 1.086 versus the greenback.
Analysts take for granted a 25 bps ECB rate cut this week, but are uncertain about the rate outlook.
The yen slipped about 0.8% to 155.90 per dollar, retracing more than Tuesday’s gains that were driven by investors unwinding bets in emerging markets.
Japanese real wages fell for a 25th straight month in April as inflation outpaces nominal pay rises.
On Tuesday, Bank of Japan Deputy Governor Ryozo Himino said the central bank must be “very vigilant” to the impact the currency’s weakness could have on the economy and inflation.
Investors see the BOJ tightening its policy in the future, though not enough to strengthen the yen.
The Australian and New Zealand dollars were roughly unchanged after domestic economic news proved less dire than investors had feared.
Emerging markets stabilised after a turbulent few days.
The Mexican peso steadied after dropping about 4% against the dollar and nearly 6% against the yen since the ruling left-wing Morena party was re-elected and, in coalition, within reach of two-thirds majorities in both Congress chambers.
Some analysts said expectations for greater government control over the economy weighed on the Mexican currency.
“President-elect Sheinbaum has signalled responsible fiscal policies and central bank autonomy,” Macquarie’s Wizman said, arguing that the selloff on Mexican assets looked overdone.
“The dust may settle soon, leading to a period of outperformance for the Mexican peso,” he added.
India’s rupee recovered from a seven-week low hit as election results showed voters had returned Narendra Modi to power by a much slimmer margin than expected.
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