Jan 8, 2019

The U.S. dollar's wild ride

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Data: FactSet; Chart: Andrew Witherspoon/Axios

A host of competing narratives and the chaos of global markets is shaking the U.S. dollar. The trade-weighted value of the dollar fell to its lowest since October on Monday.

The state of play: Currency traders are piling into the Japanese yen as global growth slows and political tensions rise. The yen hit its highest value against the dollar since March on Thursday — but has since reversed course.

  • The FX options market is showing that a measurement of call and put options has climbed strongly in favor of the euro, Reuters reports.
  • While emerging market currencies have gained since Fed Chair Jerome Powell's dovish comments on Friday, the dollar has not sold off and EM currencies, which are favored in times when the market expects the Fed to take it easy, have not taken flight.

What we’re hearing from Tempus Inc Senior FX Trader and Strategist Juan Perez:

"The U.S. Dollar benefits when the globe is in chaos and the problems that were started by the tit-for-tat tariff conflict created a safe-haven scenario... Seems like now the lack of a clear solution to trade issues, the U.S. government shutdown and solutions to political pressures elsewhere, like the Italian budget, have halted the dollar’s momentum."

Go deeper: The Chinese threat to U.S. financial dominance

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The Fed plans to keep pumping cash

Illustration: Aïda Amer/Axios

The New York Fed added $83.1 billion in temporary liquidity to financial markets Thursday, and the U.S. central bank looks primed to keep pumping cash for at least the next few months.

Why it matters: The stock market's 30% gain in 2019 was in no small part backed by the Fed's decision to cut U.S. interest rates three times and inject more than $1 trillion of temporary financing into the repo market. It also added more than $400 billion to its balance sheet in the fourth quarter.

Go deeperArrowJan 10, 2020

Powell and the risk-off bull market

Jerome Powell. Photo: Alex Wong/Getty Images

The Fed’s 180-degree turn was the story of 2019, asset managers and market analysts say.

What happened: Chairman Jerome Powell and the U.S. central bank went from raising interest rates for a fourth time at the close of 2018 and giving market watchers the explicit expectation this would continue in 2019, to doing the opposite. The Fed cut rates thrice and even began re-padding its balance sheet in the last quarter of the year, bringing it back above $4 trillion.

Go deeperArrowJan 2, 2020

Why China is no longer a currency manipulator

Data: Investing.com; Chart: Danielle Alberti/Axios

China will no longer be labeled a currency manipulator, the Treasury Department announced, just two days before President Trump and Vice Premier Liu He are set to sign "phase one" of a long-awaited trade deal.

What happened: China was added to the list just five months ago after its government allowed the yuan to slip below a 7-to-1 dollar ratio for the first time in more than a decade.

Go deeperArrowJan 14, 2020