Forex

Experts doubt the ability of Moscow and Beijing to challenge the dollar

Published

2 months ago

April 8, 2023

Experts believe that the full implementation of the plan of Russia and China to challenge the dollar on the world stage is still a long way off.

The Russian economy is too fragile and China controls capital flows, making national currencies less attractive. Therefore, it will take a long time to create any serious alternative to the U.S. dollar.

Russia’s attempts to challenge the dollar are unlikely to work, experts say, even despite its active rapprochement with China and the creation of an alternative reserve currency. So the dominance of the dollar in the global economy will remain undeniable.

Last year, Russia took such measures as rejection of currencies of “unfriendly” countries and plans to create a new reserve currency together with China and other countries of BRICS, which also include Brazil, India and South Africa. However, all attempts to reset the dollar from the top of the world market, according to experts, will not be a real challenge for the U.S. currency.

Jay Zagorsky, an economist at Boston University, sees one of Russia’s main problems as the inextricable connection of the economy to the dollar through oil trade. Crude oil is Moscow’s main source of revenue, and transactions are often conducted in dollars. At the same time, the economy is under strict sanctions, which does not bode well for the dollar plan so far, writes Business Insider.

As for China, although it is becoming a major economic power in the world, and within the next decade there may be a bipolar currency system in which the yuan will compete with the dollar, this scenario is only a remote possibility. It will take a long time for it to be trusted and widely used in trade, whereas the dollar has accounted for 96% of world trade in recent decades and the yuan only 2% of world trade.

Earlier we reported that the banking crisis led to the collapse of the Swiss franc.

Forex

World shares at 13-month peak as Wall St scales 2023 highs

Published

1 hour ago

June 10, 2023

U.S. shares struck new highs for the year on Friday and helped lift world stocks to a 13-month peak, as rising bets that the Federal Reserve will skip a rate hike next week overshadowed worries about U.S. markets being drained of cash.

Helped by a surge in Tesla Inc TSLA, which jumped as much as 5.7%, the S&P 500 SPX rose to levels last seen in August before paring gains. It finished higher 0.1%, the best close since Aug. 16. The Nasdaq Composite IXIC added 0.13%, and the Dow Jones Industrial Average DJI rose 0.16%.

Over in Europe, the STOXX 600 SSXXP index lost 0.13%, but MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) jumped 0.74% overnight. Combined with gains on Wall Street, the MSCI’s broadest index of world stocks IIACWI added 0.18% at a 13-month high. For the week, the index for world stocks might notch a 0.6% rise.

“As of today, the S&P 500 is back in a bull market,” said Arthur Hogan, chief market strategist at Briley Wealth, noting that the index finished Thursday with a 20% gain off its recent lows. “The one thing that could tip over the apple cart is an over-aggressive Fed.”

Refinitiv data showed the S&P 500 up 20% from its Oct. 12 closing low. The most commonly accepted definition of a bull market is a 20% rise off a low, and a 20% decline from a high for a bear market, but that is open to interpretation.

Traders now lay 73% odds (FEDWATCH) on the Fed keeping rates steady on June 14, in a range of 5%-5.25%, pausing its most aggressive hiking cycle since the 1980s.

Bets for a pause were supported by data on Thursday that showed the number of Americans filing new jobless claims surged to a more than 1 1/2-year high, indicating a loosening labour market that could further quell inflation.

Investors also hope the Fed will pause its rate rise campaign as a quirk of the U.S. debt ceiling negotiations has posed a potential threat to market liquidity.

The U.S. government is expected to rush to sell short-term debt to replenish its Treasury General Account (TGA), potentially at yields so high that banks raise deposit rates to compete for funding, reducing interest in riskier assets like equities.

“We’re all worried about liquidity,” said Ben Jones, director of macro research at Invesco. The Fed, he added, “still wants to tighten” policy and therefore may allow the TGA rebuild to drain liquidity from markets without stepping in to provide other support tools.

This fear was not dominating trading on Friday, however.

Fed Chair Jerome Powell said on May 19 it was still unclear whether U.S. interest rates will need to rise further, and the risks of overtightening or undertightening had become more balanced.

Uncertainty about the U.S. rates outlook supported Treasury yields.

Two-year Treasury yields (US2YT=RR), which are extremely sensitive to monetary policy expectations, rose to 4.602%, while the yield on benchmark 10-year notes US10YT=RR climbed to 3.743%.

The U.S. dollar index DXY, which measures the performance of the U.S. currency against six others, rebounded 0.21% to 103.47.

The euro EURUSD slipped 0.32% to $1.0748, just below Thursday’s two-week high of $1.0787.

Elsewhere, the Turkish lira USDTRY hit a new record low overnight of 23.54 per dollar, even as President Tayyip Erdogan’s appointment of a U.S. banker as central bank chief sent a strong signal for a return to more orthodox policy.

Erdogan last week put well-regarded former finance minister Mehmet Simsek back in the post. Simsek said this week that the guiding principles for the economy would be transparency, consistency, accountability and predictability.

Leading crypto asset bitcoin BTCUSD dipped 0.2% to $26,450 after crypto exchange Binance said it was suspending dollar deposits and would soon pause fiat currency withdrawal channels following a U.S. Securities and Exchange Commission crackdown.

Crude oil edged higher but gains were tempered by a report that the United States and Iran were close to a nuclear deal, although denials from both parties kept it off the previous session’s lows.

The prospect of a deal, which reportedly included scope for an additional 1 million barrels per day of Iranian supply, initially dented crude prices.

Brent crude futures whipsawed over the course on Friday, and ended down 1.3% at $74.98 a barrel. West Texas Intermediate crude CL1! ALOST LOST 1.3% at $70.38 a barrel.

Forex

Dollar Lost 0.42% to 139.38 Yen

Published

3 hours ago

June 10, 2023

Dollar/Japanese yen: 139.38 Japanese yen per dollar (0.0072 dollar per Japanese yen).

This week the dollar lost 0.42% vs. the Japanese yen
Down for two straight weeks
Down 0.89% over the last two weeks
Largest two-week percentage decline since Friday, March 24, 2023
Today the dollar gained 0.33% vs. the Japanese yen
Up three of the past four sessions
Off 7.17% from its 52-week high of 150.149 hit Thursday, Oct. 20, 2022
Up 9.01% from its 52-week low of 127.86 hit Friday, Jan. 13, 2023
Rose 3.70% vs the Japanese yen from 52 weeks ago
Month-to-date it is up 0.03% vs the Japanese yen
Year-to-date the dollar is up 6.30% vs the Japanese yen

Forex

Dollar Index Falls 0.56% This Week to 97.22

Published

5 hours ago

June 10, 2023

The WSJ Dollar Index is down 0.54 point or 0.56% this week to 97.22

Largest one-week point and percentage decline since the week ending May 5, 2023
Down for two consecutive weeks
Down 0.84 point or 0.86% over the last two weeks
Largest two-week point and percentage decline since the week ending March 24, 2023
Today it is up 0.10 point or 0.10%
Largest one-day point and percentage gain since Friday, June 2, 2023
Up three of the past four trading days
Off 7.54% from its 52-week high of 105.14 hit Tuesday, Sept. 27, 2022
Up 3.01% from its 52-week low of 94.37 hit Wednesday, Feb. 1, 2023
Rose 0.49% from 52 weeks ago
Month-to-date it is down 0.81%
Year-to-date it is up 0.66 point or 0.69%