Dollar soars amid nervous markets

The dollar made significant gains overnight amid nervous global financial markets. Most currencies fell by more than 1.5 percent against the dollar as equity markets were whipsawed. Investors are having difficulty finding balance following the biggest drop in equities since 1987. Bond yields edged higher and oil prices were steady. Libor rates for US dollar jumped as pressure on credit markets grows. US Retails Sales for February released this morning missed expectations and fell 0.5%.

“Patience is the calm acceptance that things can happen in a different order than the one you have in mind.”
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  • FX Rates
    March 17, 2020

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  • USD

    The US dollar made strong gains across the board. The biggest gains were made against two Scandinavian currencies: +2.3% versus the Norwegian krone and +2.2% versus the Swedish krona. Investors sought the dollar in a risk-off search for safe haven currencies, and stress in funding markets added to the demand for the dollar. Retail sales contracted unexpectedly by 0.5% in February following January’s increase of 0.6% and were worse than expectations of +0.2%.


    The UK pound dropped 1.5% overnight but is holding above $1.20. The pound has fallen by nearly 8% over the last week, as investors look to sell assets in countries – according to some analysts, the UK and Sweden – that seem to be slow to respond to the coronavirus.


    The euro broke below $1.10 for the first time since late February, as the dollar gained across the board. A funding crisis in the EUR/USD swap market worsened overnight – the swap from EUR into USD cost nearly 10% versus 0.15% on a normal day.


    The USD/CAD currency pair soared over C$1.40 and to its highest level since January 2016. Prime Minister Justin Trudeau said his fiscal stimulus package to support Canadians should be announced tomorrow. Canada closed its borders to most foreigners, excluding US citizens.


    The dollar climbed 1% against the Japanese yen as investors adjust safe haven currencies in their portfolios. Japan’s Finance Minister Taro Aso spoke with US Treasury Secretary Steven Mnuchin about the need for a coordinated G-7 fiscal response to the coronavirus outbreak.
    The USD/CNH offshore market (freely traded) compared to the onshore USD/CNY market (controlled by China’s central bank) shows that traders expect a weaker renminbi in line with a sell-off in regional assets.

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Scott Petruska, CFA
Scott Petruska, CFA

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