I usually wouldn’t pay attention to stuff like this. I take it as negotiating bluster. But the world is changing and suddenly we have a time window change of direction where precious metals are suddenly strong and the Greenback can’t seem to right the ship. Sometimes big things develop out of little beginnings.
If you get the dollar right, you will get a lot of things right. Hard-lined policy in Washington has created a safe-haven flight to the dollar. Trade policy and sanctions have resonated an uncertain atmosphere for growth in many areas of the world
U.S benchmarks are lower this morning with the S&P 500 and Nasdaq both down more than 0.5% on emerging market fears and the escalation of the conflict with Turkey. China is leading the way lower on a delayed reaction to Monday night’s trio of dismal reads; Industrial Production, Fixed Asset Investment and Retail Sales.
After a rough start to the week, Asian stocks seem to have found some support as the Turkish Lira steadied below 7 per dollar. Japan’s Nikkei 225 rose 1.8% with all sectors in green territory as the Yen gave up some of yesterday’s gains. Australia’s ASX 200 and the Korean KOSPI also edged higher but gains were limited.
U.S benchmarks are eyeing a strong finish to the week after the S&P 500 closed at the highest level since Jan. 29, the session in which it set its all-time. Amazon beat earnings estimates yesterday after the bell and its gain of 4% premarket has helped the Nasdaq shrug off Facebook’s record loss as it trades more than 1% from yesterday’s low.
China’s yuan is back under pressure, as the dollar bulls returned and the People’s Bank of China seems to be shifting towards a looser monetary policy to offset the impact of U.S. trade tariffs & slowing domestic economy. The PBoC injected a record $74 billion of Medium-Term Lending Facility credit into major banks yesterday. This step comes after the central bank has already cut its reserve requirements three times in 2018, with further cuts expected in the next couple of months.
The slight gains in U.S. equities on Monday failed to influence Asian investors as trade fears and the Renminbi’s slide continued to drive risk aversion. This sharp depreciation in the Chinese currency is worrying investors. In August 2015, the U.S. dollar/Canadian dollar (USD/CNY) currency pair appreciated from 6.21 to 6.44, a two-day gain of 3.85%.
Modern wars are fought with precision tactics and tools like drones, targeted strikes, and heavy reconnaissance to identify where the enemy is weakest. But, as any military historian will tell you, wars used to involve far more blunt tools, like catapults and trebuchets, to inflict maximum damage on the enemy; friendly fire be damned.
While the speed of selling has slowed down compared to the early part of the week, emerging market currencies have continued to show weakness in the early hours of Thursday morning. The Thai Baht, Malaysian Ringgit, Chinese yuan, Indonesian Rupiah and Indian Rupee are all trading lower at time of writing.
The Chinese yuan plummeted 3%--its lowest this year, hitting a six-month low against the dollar (USD). During the session, the yuan was down more 0.5% to against the USD for the third straight day in a row. There hasn’t been a drop this dramatic since China’s August 2015 devaluation where the currency fell 2.8% in just two days.