Dollar slides as stocks and oil rebound

The US Dollar Index is lower overnight by 1% as it takes a break from a strong uptrend and after stretching to all-time highs. Investors finished the worst week in a decade for stocks and oil, as they examine the unprecedented government actions to support their respective populations, economies and markets. Big up-moves are seen in currencies that have suffered the most including the UK pound, Canadian dollar and Australian dollar. Bond yields have softened and traders await US Existing Home Sales (Feb) at 10am today.

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    March 20, 2020

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  • USD

    Foreign currencies are finishing the week by rallying against an overstretched dollar. Uncertainty is still high as the impact from the virus remain unknown. A global recession now seems to be a given by traders, the depth of it the big question. US stock markets open higher as foreign markets are mostly in the green. US Treasury 10-year yields dropped back to 1%. The week saw record inflows into cash, primarily in the form of short-term money market instruments. Credit spreads narrowed slightly.


    The UK pound is trading nearly 2.5% higher versus the dollar, recovering from yesterday’s all-time lows near $1.14. Traders were relieved when the UK government provided new stimulus to support UK jobs, wages and its economy.


    The euro was volatile overnight, moving between $1.0650 and $1.0830. It currently trades near yesterday’s close at $1.07, and not far from three-year lows. Sovereign bond yields fell and credit spreads between them narrowed.


    The Canadian dollar made a huge recovery overnight, gaining nearly 2% versus the dollar. USD/CAD had reached C$1.4665 on Wednesday, which was a five-year high. Canada Retail Sales released this morning increased by 0.4% in January, but traders acknowledge that they will be much worse in February and March.


    The Japanese yen moved little, as demand for safe-haven currencies lessened. Onshore Chinese yuan (CNY) also moved little, but speculators in the offshore CNH market remain significantly bullish the dollar.

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Scott Petruska, CFA
Scott Petruska, CFA

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