Tag Archives: capital flows

Overview: The jump in prices paid in yesterday's US ISM manufacturing coupled with the stronger eurozone inflation, with a new cyclical high reported in the core rate, underscores the market theme of higher-for-longer. This is seen as dollar supportive but also negative for risk-assets, including and especially equities. European benchmark 10-year yields are up another couple of basis points today and the 10-year US Treasury yield is pushing above 4% for the first...

Overview:  Rising rates and falling stocks provided the backdrop for the foreign exchange market this week. The dollar appreciated against all the G10 currencies but the Swedish krona, which is still correcting higher after the hawkish pivot by the central bank. The market looks for a later and higher peak in the Fed funds rate. This coupled with the risk-off sentiment helped the dollar extend its recovery after falling since last September-October. The yen's...

Overview: The capital markets have shrugged off the more than 1% loss of the Nasdaq and S&P 500 yesterday and have jumped back into risk assets. The stocks and bonds have been bought and the dollar sold. Chinese and Hong Kong shares gained more than 1% today. Japan was mixed and Taiwan and South Korean equites saw minor losses. Europe's Stoxx 600 is up over 1%. Nasdaq futures are up nearly 1.2% while the S&P 500 is lagging slightly. European bonds yields are...

Overview: The dollar is having one of the largest setbacks in recent weeks. We expected the dollar to soften ahead of next week’s CPI, which may fan ideas/hopes of a peak in US price pressures, but the magnitude and speed of the move is surprising, and likely speaks to the extreme positioning. Still, we caution that the intraday momentum indicators are stretched, and the underlying bullish sentiment, may see North American operators take advantage of the dollar’s...

Swiss Franc The Euro has fallen by 0.33% to 1.1024 EUR/CHF and USD/CHF, March 16(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com - Click to enlarge FX Rates Overview: Yesterday’s new record highs in the S&P 500 and Dow Jones Industrial helped set the tone for today’s advance in the Asia Pacific region and Europe. The MSCI Asia Pacific Index snapped a two-day decline, with other major markets rising today. The Dow Jones Stoxx 600 had edged to new...

Swiss Franc The Euro has fallen by 0.34% to 1.0547 EUR/CHF and USD/CHF, April 2(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com - Click to enlarge FX Rates Overview: After US stocks dropped more than 4% yesterday, investor sentiment has improved, apparently sparked by ideas that the pain will force oil producers to find a way to reduce supply. Oil prices have surged, with the May WTI contract rallying around 7%. Asia Pacific equities were mostly...

Over the past five sessions, the yen is the strongest of the major currencies, appreciating about 1.7% against the US dollar, eclipsing the Swedish krona, which rallied strongly today after the Riksbank’s surprise rate hike. Given the sell-off in equities and the decline in markets, the yen’s strength is not surprising. What was surprising though was the dollar’s resilience against the yen earlier this month as equities...

The US policy mix gets a privileged place in our understanding of what is the dollar. Tighter monetary policy and looser fiscal policy could be the closest thing to an elixir for currencies. It is the policy mix that the US is pursuing. The idea is that such a policy mixed draws capital inflows. This is exactly what is happening. The June TIC data was reported yesterday, and there was a net purchase of $114.5 bln of US...

Chinese officials do not seem to appreciate the extent of its isolation. The disruption from the US as Trump positions the US as a revisionist power-one that wants to alter the world order, which it was instrumental in constructing, may have obscured the fact that China’s practices are a source of frustration and animosity broadly and widely. Chinese officials do not seem to understand why Europe, for example, does not...

The combination of a falling dollar and rising US interest rates has sparked a concern never far from the surface about the foreign demand for US Treasuries. Moreover, as the Fed’s balance sheet shrinks, investors will have to step up their purchases. This Great Graphic was created by the Institute of International Finance (IIF). It is drawn from the US TIC data that tracks foreign holdings of US Treasuries. The most...