Though not as large as some moves seen last week, the United States Dollar is starting this week trading stronger against most major currencies.
Overview
Global equities are largely softer this morning, and the Dollar Spot Index (DXY) is higher today for the fourth session in a row. Caution continues to abound across the world after this cycle’s central bank meetings highlighted cracks beginning to show in the global economy.
China’s ailing property sector continues to be a major focus. Developer China Evergrande Group’s shares fell nearly 22% after concern began to mount over a possible liquidation – the firm said it is not able to issue any new debt and canceled key credit meetings with little notice. Industrywide, property developer shares in China fell north of 7% and weighed heavily on global risk sentiment. While the world’s second-largest economy continues to flail, the world’s largest economy in the US, by contrast, and as emphasized by the Federal Reserve last week, remains remarkably strong, and investors are reaching for the relative safety of the Dollar.
Some domestic uncertainty in the US remains, however, as the federal government lurches ever closer to a shutdown, due if Congress cannot fund the government by the end of the month. While prevailing schools of thought do not see a huge dent to dollar strength down the line if a potential shutdown remains short, a longer-term lack of funding could weigh enough on the larger economy to impact the US’ ability to meet the Fed’s rather aggressive growth projections in the fourth quarter of this year.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
USD ⇑
It seems the only traditional safe haven investors trust as of late is the United States Dollar as Swiss Franc finds itself weakening a further half a percent against the Buck, a ten-day losing streak. Last week the Swiss National Bank kept its interest rates unchanged and, mirroring the European Central Bank, struck a comparatively dovish message after the fact. The Swiss economy is underperforming even that of the Eurozone, and the central bank seems to be likely to institute policy cuts before at least the Fed as its tolerance for higher rates for longer diminishes on dimming forecasts.
JPY ⇓
Japanese Yen continues to slide against the USD, weakening yet again a quarter percent overnight and into this morning and pushing it to its weakest level since last November. After the Bank of Japan declined to change its ultra-loose monetary policy last week, it’s clear that Governor Kazuo Ueda is looking for more sustained indicators of strong growth in the island nation rather than just one set of readings before a policy change is instituted. JPY’s fortunes are unlikely to change for the better without concrete action.
