Forex
Dollar steady ahead of Powell Mark II; euro looks to French politics
![](https://letizo.com/wp-content/uploads/2024/07/dollar-steady-ahead-of-powell-mark-ii-euro-looks-to-frenchpolitics_668ea299d6497.jpeg)
Investing.com – The U.S. dollar stabilized in early European trade Wednesday, remaining near a three-week low, after the first day of Fed Chair Jerome Powell’s two-day testimony on Capitol Hill, while the euro steadied amid political uncertainty.
At 05:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, edged marginally lower to 104.770, just above Monday’s near one-month low of 104.622.
Dollar awaits Powell part two
The dollar traded in a tight range Wednesday in the wake of Powell’s initial testimony before Congress, with the Fed chair flagging the recent labor market cooling as an increasingly important factor in deciding when the U.S. central bank will start cutting interest rates.
Powell also said a rate cut is not appropriate until the Fed gains “greater confidence” that inflation is headed toward the 2% target.
But in mentioning that elevated inflation was not the only risk the central bank faced, the Fed chief could be seen as preparing the ground for a September interest rate cut.
returns to Washington later Wednesday, and traders will be looking for more refinement in his comments ahead of Thursday’s vital consumer inflation data.
“Powell’s prepared remarks focused on two-way risks, reiterating the need for more data input to justify monetary easing,” said analysts at ING, in a note. “So, more of the same rhetoric, and we believe Powell is happy with keeping markets relatively quiet at this stage as some data starts to go in the right direction.”
French political gridlock
rose 0.1% to 1.0819, remaining below Monday’s near one-month high of 1.0845 in the wake of the second round of the French parliamentary elections.
The poll resulted in a shock election win for the country’s leftist alliance, after the far right National Rally had triumphed in the first round, meaning the country now faces the possibility of a hung parliament.
“It has become increasingly clear that coalition talks in France will prove a lengthy and complicated process,” said ING. “Markets would probably choose the technocratic solutions over the others, but it may well take weeks to break the gridlock, and we remain concerned about the bond market getting unnerved by such immobility.”
traded 0.1% higher at 1.2801, not far off Monday’s 1.2845, its strongest since June 12, in the wake of Thursday’s general election.
Yen weakens after Japanese inflation
In Asia, traded 0.2% higher to 161.56, coming back in sight of recent 38-year highs.
Japanese producer price index inflation data showed that while factory inflation picked up in June, it still remained relatively weak, furthering doubts over whether the Bank of Japan will have enough impetus to keep tightening policy.
traded 0.1% higher to 7.2760, with the yuan weakening after inflation shrank in June, reflecting little confidence to spend among consumers.
The country’s inflation improved, shrinking at its slowest pace since February 2023, but still showed that Chinese disinflation remained in play.
fell 0.8% to 0.6072 after the kept rates steady and flagged progress in bringing inflation back to its 1% to 3% annual range. The central bank also said that it could loosen policy on further easing in inflation.
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