Category Archive: 4.) Marc to Market

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Great Graphic: The Dollar’s Role

2018-10-06

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2018-10-06

Currency's Share of the Category in the International Monetary System Q4 2017
This Great Graphic comes from Peter Coy and team's article in Business Week. It succinctly shows three metrics for the internationalization of domestic currencies: global payments, international bonds, and foreign exchange reserves. It does not strike me as surprising, and the role of the euro as a payments currency reflects its role in intra-European trade.

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FX Daily, October 05: US Jobs Data will Test Dollar Bulls and Bond Bears

2018-10-05

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2018-10-05

The US dollar is firmer against most of the major and emerging market currencies. The yen and sterling are resisting the pressure, while the South African rand and Russian rouble are paring some of this week's declines. US equity losses yesterday weighed on Asian and European trading today.

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FX Daily, October 04: Dollar Consolidates Gains while Yields Continue to Rise

2018-10-04

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2018-10-04

The US dollar is consolidating yesterday's gains against most of the major currencies, though the dollar bloc is underperforming. Bond yields are moving higher, and equities are lower. With a light data and events stream, the price action itself is the news.

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Cool Video: Bloomberg Clip from Discussion on Emerging Markets

2018-10-03

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2018-10-03

In my first television appearance since joining Bannockburn Global Forex, I joined Tom Keene and Francine Lacqua on the Bloomberg set. In this nearly 2.5 min clip, we talk about the Indonesia rupiah and the dollar's move above the IDR15000 level for the first time since the 1997-1998 Asian financial crisis.

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FX Daily, October 02: Greenback Advances

2018-10-02

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2018-10-02

The US dollar is rising against most of the major and emerging market currencies. The Swiss franc and the Japanese yen are the exceptions and are holding their own. Global equities are mixed. Asia, excluding Japan, was mostly lower, with 1.2% losses in Taiwan and South Korea and 2.5% drop in Hong Kong and in the H-shares that trade there.

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A Word About the Q2 COFER Report

2018-10-02

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2018-10-02

US Dollars in Billions, Q2 2017 - Q2 2018
The IMF reports the most authoritative currency allocation of global reserves at the end of every quarter with a quarter delay. Invariably, an economist, strategist, or journalist is inspired to write why some data nugget confirms the demise of the dollar as the dominant currency.

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FX Daily, October 01: NAFTA Deal Struck, Softer EMU Mfg PMI, and Firm Greenback Starts Week

2018-10-01

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2018-10-01

The Canadian dollar and Mexican peso are extending its pre-weekend gains on news that a new NAFTA deal (US-Mexico-Canada Agreement USMCA) has been struck. Against most of the other major and emerging market currencies, the US dollar is firm. China's mainland and Hong Kong markets are closed for a national holiday.

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Fed Delivers, Market Yawns

2018-09-29

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2018-09-29

The Federal Reserve did what it was widely to do. The fed funds target range was lifted 25 bp to 2.00-2.25%. Three-quarters of Fed officials anticipate a hike in December. The market had discounted around an 80% chance. The Fed sticks with the three rate hikes in 2019 and one in 2020. The year-end rate in 2021 is the same as in 2020.

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FX Daily, September 28: Dollar Remains Firm While Italy is Punished

2018-09-28

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2018-09-28

The US dollar's post-Fed gains have been extended, though the upside momentum appears to be stalling. Japan's Nikkei advanced 1.35% on the back of the yen's declines and reached its highest level since 1991. Chinese shares (A and H) rallied amid reports that MSCI and FTSE-Russell are boosting Chinese shares in their benchmarks.

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FX Daily, September 26: The Dollar Index has Fallen Four of the Five Times the FOMC met this Year

2018-09-26

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2018-09-26

The US dollar is trading with a softer bias in tight ranges. The euro and sterling have been confined to yesterday's ranges, while the greenback briefly traded above JPY113.00 for the first time in two months. The South African rand and Turkish lira are leading the most emerging market currencies higher. Asian equities moved higher, led by Hong Kong, which returned from yesterday's holiday.

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FX Daily, September 25: Greenback Remains at the Fulcrum

2018-09-25

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2018-09-25

The major currencies are mixed in quiet turnover. Most of the European currencies are firmer, while the dollar-bloc currencies, yen and Swiss franc are softer. Emerging market currencies are steady to higher, though there are a few exceptions in Asia, where the Indonesian rupiah and the Chinese yuan are off about 0.3%, while the Indian rupee and Malaysian ringgit are around 0.2% lower.

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FX Weekly Preview: Next Week’s Drivers

2018-09-24

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2018-09-24

It is a testament to the Federal Reserves communication and the evolution of investors' understanding that we can say that the rate hike that the central bank will deliver is not as important as what it says. A rate hike is a foregone conclusion. According to the CME's model, there is about an 85% chance of December hike discounted as well.

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Portfolio Re-Balancing and the Dollar

2018-09-22

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2018-09-22

Boosted by tax reform, deregulation, and strong earnings growth, US equities have motored ahead, leaving other benchmarks far behind. As the Great Graphic here shows, most of the other benchmarks are lower on the year. The S&P 500 (yellow line) is up 8.8% for the year before the new record highs seeing seen now, while the Dow Jones Stoxx 600 from Europe (purple line) is still off 1.7%.

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FX Daily, September 20: The Mixed Performance Makes it Difficult to Talk about The Dollar

2018-09-21

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2018-09-21

Sometimes the dollar is the key mover, but sometimes, like today, it seems to be the fulcrum, reflecting disparate moves among other currencies.  While the euro is at two-month highs, the yen is near two-month lows.   The euro is bouncing off two-month lows and the 100-day moving average against sterling.   Most emerging market currencies are advancing against the dollar today. 

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FX Daily, September 19: Dollar Trades Heavily as Emerging Markets Follow China

2018-09-19

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2018-09-19

One would not have a clue looking at global equities that there has been a sharp escalation in trade tensions in the past 36 hours. As was well tipped the US imposed a 10% tariff on $200 bln of Chinese goods and indicated that the tariff will rise to 25% at the start of next year. President Trump also threatened to quickly follow up with another tariff on $267 bln of Chinese goods it retaliated.

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Dollar Slips, though Emerging Markets Trade Heavily

2018-09-18

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2018-09-18

The US dollar is beginning the new week on a soft note, as China threatens not to accept the invitation for trade talks in Washington if the US imposes new tariffs on $200 bln of its goods, which the Wall Street Journal reports could come as early as today. Meanwhile, the MSCI Emerging Markets Index is giving back half of the 2.5% rally seen in the second half of last week.

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FX Weekly Preview: Dollar Pullbacks Remain Shallow as Rate Differentials Widen

2018-09-17

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2018-09-17

The trajectory of monetary policy in the US and Europe has been fairly clear. There is practically no doubt that the Fed will hike rates on September 26. Despite softer than expected PPI and CPI figures, the market has become more confident of another move in December. The Federal Reserve's balance sheet unwind reaches its maximum velocity of $50 bln a month in Q4.

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FX Daily, September 14: Dollar Losses Extended

2018-09-14

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2018-09-14

The US dollar remains on the defensive after retreating yesterday.  Its losses against the most of the major and emerging market currencies are being extended today.  The combination of softer US inflation coupled with a less dovish than expected ECB, a Bank of England lifting growth forecasts, while warning that a Brexit without an agreement could spur higher mortgage rates, and a more aggressive rate hike by Turkey conspired to force the dollar...

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FX Daily, September 13: Vulnerable To Disappointment

2018-09-13

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2018-09-13

There is an eerie calm in the markets ahead of the highlight for the day and week. The central banks of the eurozone, UK, and Turkey hold policy meetings, and the US reports August CPI. The greenback is a mostly firmer, with the Australian dollar as the notable exception. On the one hand, we would note that is it higher for the fourth consecutive sessions, after finding some support near $0.7100 earlier in the week. 

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FX Daily, September 12: Dollar Chops in Narrow Ranges

2018-09-12

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2018-09-12

Eurostat confirmed that EMU industrial output fell for a second consecutive month in July. The 0.8% decline was larger than expected and is the third decline of such a magnitude in four months and weighed on the euro. German and Spanish industrial output had surprised on the downside last week, and Italy matched suit today with a report showing a 1.8% contraction, much larger than expected, and bringing the year-over-year rate to -1.3% (workday...

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