The coronavirus crisis prompted investors to rush for US dollars, with the greenback skyrocketing against a basket of major currencies by nearly 9% over the past ten days in the aftermath. To ease the panic and avoid currency shortages in the banking sector, the Federal Reserve decided to enhance its latest stimulus package by increasing dollar supply in overseas markets through its swap line operations. Yet, whether such an action will bring calm to nervous investors remains a question. How do FX swap lines function? FX swap [..]
With world stocks collapsing and entire economies going into lockdown, everyone is wondering how much worse this crisis can get and how long it will last. In a nutshell, the situation will probably get worse before it gets better, both in financial markets and the real economy, as most of Europe and America are still far from ‘peak virus’. Ultimately, this shock will subside and given the overwhelming stimulus measures lately, the market rebound could be meteoric. However, we might [..]
After the production alliance between Saudi Arabia and Russia fell apart, pushing oil prices dramatically lower on concerns of a supply war at a time when the virus outbreak depresses demand, everyone is wondering what’s the floor for crude. We seem to be headed for a period where markets are flooded with supply as the major players compete for market share, which could keep prices at very low levels. Ultimately, the dust will settle and prices could recover, but that [..]
As stock markets reel from the coronavirus, and investors flee to safe havens such as the yen and gold, the US dollar has turned out to be an unexpected casualty of the market turmoil. But after emergency rate cuts failed to lift sentiment, some movement on the fiscal policy front has managed to soothe investor nerves, at least temporarily, giving a small reprieve to tumbling bond yields, and in turn the greenback. Stocks suffer steepest losses since financial crisis Fears [..]
OPEC members tentatively agreed on Thursday to deliver a larger output cut than they initially proposed last month in the face of the coronavirus outbreak. But it is now up to Russia to approve it when it joins the meeting on Friday. While it is almost certain that Moscow will cave in, there is little optimism that the announcement will trigger the much-needed sustainable rally in oil markets even though a short-lived upside correction cannot be ruled out in the near-term. Russial may not be happy, but [..]
The yen’s status as a safe-haven has come into question lately, amid concerns that the virus could hammer Japan’s exporters and tilt the already fragile economy into recession. The yen has also lost some of its defensive appeal because the euro is emerging as a funding currency, giving it haven-like characteristics as well. This is likely to suppress volatility in euro/yen, and going forward, any yen gains arising from virus concerns may be more visible against commodity currencies. Is the [..]
The yen’s status as a safe-haven has come into question lately, amid concerns that the virus could hammer Japan’s exporters and tilt the already fragile economy into recession. The yen has also lost some of its defensive appeal because the euro is emerging as a funding currency, giving it haven-like characteristics as well. This is likely to suppress volatility in euro/yen, and going forward, any yen gains arising from virus concerns may be more visible against commodity currencies. Is the [..]
The Democratic primary race, which will decide who will square off against President Trump at the November presidential election, has kicked off. The field of candidates remains crowded and the outcome uncertain, though national polls increasingly suggest that Senator Bernie Sanders could emerge as the winner. Markets have been complacent so far, assuming that a Sanders surge might boost Trump’s re-election chances by dividing the Democrats. Yet, if Sanders continues to gain momentum, then US stocks – especially the healthcare [..]
The deadly virus theme that has plagued global markets, devastating commodity prices and risk-sensitive currencies, seems to be calming down. The rate of infections appears to be levelling off, and Chinese media suggest scientists found a drug that effectively treats patients. If confirmed, that could ignite a fresh wave of risk-taking, helping the commodity-linked Australian, Canadian, and New Zealand dollars to rally in relief, as safe-havens like the yen come under selling pressure. Is it a short-term thing? Evaluating the [..]
US stocks had a spectacular rally in 2019 with little volatility despite trade tensions, monetary easing and geopolitical conflicts, with the S&P 500 stock index adding a whopping 27% to its value during the year to trade at fresh uncharted waters. As the overstretched increase and the unstoppable print of record highs raise concerns that a cliff edge may be around the corner, there are reasons to believe that 2020 may be another decent year or at least not a [..]
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