Tag Archives: USD

Emerging-Market Selloff Deepens Amid Fresh Alarms Over Contagion

  • Rand sinks as South Africa enters recession in second quarter
  • Developing-nation currencies set for lowest since May 2017

Emerging markets sold off anew Tuesday as South Africa entered a recession and Indonesia’s rupiah joined currencies from Turkey to Argentina in tumbling toward record lows, reinforcing concern that contagion risks are too big to ignore.

MSCI Inc.’s index of currencies dropped for a fifth time in six days, set for the lowest close in more than a year. The rand led global declines as data showed the economy fell into a recession last quarter. Turkey’s lira slid on worry the central bank will disappoint investors at its rate meeting next week, while the Argentine peso slumped to a record and Indonesian rupiah sank to the lowest in two decades even after the central bank intensified its fight to protect it.

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The dollar extended its advance to a fourth day as Donald Trump threatened to ramp up a trade dispute with China with an announcement of tariffs on as much as $200 billion in additional Chinese products as soon as Thursday. As U.S. rates rise, investor fears over idiosyncratic risks in emerging markets have climbed, including Argentina’s fiscal woes, Turkey’s twin deficits, Brazil’s contentious elections and South Africa’s land-reform bill.

Meantime, the dollar is winning by default, according to Kit Juckes, a global strategist at Societe Generale SA.

“There’s not much to make me think the dollar should be going up, but there’s plenty to make me nervous about other currencies,” Juckes said. “The dollar is very strong and lacking rate support, but other currencies are worse.”

HIGHLIGHTS:
  • The rand plunged as much as 3.4 percent after a report showed South Africa’s economy unexpectedly entered into a recession for the first time since 2009. GDP shrank an annualized 0.7 percent last quarter from the prior three months.
  • The lira sank as much as 1.3 percent and Mexico’s peso weakened as much as 1.6 percent.
  • Argentina’s peso slid to a fresh record low. 
  • Indonesia’s rupiah fell for a sixth day, sinking to a fresh two-decade low.
  • CBOE’s emerging-market volatility gauge rose to the highest in almost three weeks.
  • MSCI’s index of EM stocks dropped for a fifth day; MSCI’s currency measure slipped 0.6 percent, the most in almost a month.
  • Russia’s ruble pared losses after the central bank edged closer to raising interest rates for the first time since 2014.

READ: JPMorgan Survey Shows How Quickly Emerging Markets Can Unravel

Here’s what other analysts are saying about the latest in emerging markets:

It’s Not Enough

Tsutomu Soma, general manager for fixed-income trading at SBI Securities Co. in Tokyo:

  • “The measures announced by Argentina and Turkey are probably not enough to lead to a significant improvement in their fundamentals”
  • “Contagion risks to other emerging markets are growing especially as the Fed tightens”

‘Set to Suffer’

Michael Every, head of Asia financial markets research at Rabobank in Hong Kong:

  • “Emerging-market FX are set to suffer almost regardless of what they do, the only issue is how much”
  • The dollar will remain on the front foot against emerging markets as long as the U.S. continues to raise rates and boost fiscal spending while keeping the trade war fears on the radar

‘Further Pain’

Lukman Otunuga, research analyst at FXTM:

  • “Emerging market currencies could be destined for further pain if the turmoil in Turkey and Argentina intensifies”
  • “The combination of global trade tensions, a stabilizing U.S. dollar and prospects of higher U.S. interest rates may ensure EM currencies remain depressed in the short to medium term”

‘A Penny Short’

Stephen Innes, head of Asia Pacific trading at Oanda Corp. in Singapore:

  • Argentina’s measures are “likely a day late and a penny short”
  • “These moves are a step in the right direction, but they’re unlikely to be convincing enough to remove currency speculators from the driver’s seat. I guess it’s all down the IMF’s ‘White Knight’ to the rescue. However, we are getting into the realm of unquantifiability which makes the market utterly untradable”

Most Vulnerable

Masakatsu Fukaya, an emerging-market currency trader at Mizuho Bank Ltd.:

  • Contagion risks from Argentina and Turkey are growing for other emerging markets and economies with weak fundamentals such as those with current-account deficits and high inflation rates
  • Currencies of countries such as Indonesia, India, Brazil and South Africa have been among most vulnerable
  • The Fed’s rate increases and trade frictions means the underlying pressure on emerging currencies is for a further downward move

— With assistance by Tomoko Yamazaki, Yumi Teso, Lilian Karunungan, and Ben Bartenstein

Source: Bloomberg

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More Emerging Market Chaos – How Long Before It Spreads To The Developed World?

Emerging market chaos is now front page news.

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The Dollar Is Crashing Again…

Following US Treasury Secretary Mnuchin’s wishy-washy walk-back this morning, ECB president Draghi has failed to deliver a dovish enough press conference to reverse the trend and the dollar index is crashing to new cycle lows once again…

The dollar continues to press its weakest levels since Dec 2014 … live chart

https://www.zerohedge.com/sites/default/files/inline-images/20180125_usd.jpg

This is the 7th weekly drop in a row, and the worst week for the dollar since March 2015.

As a reminder, the Yuan is getting very close to its pre-devaluation levels…suggesting to some that an intervention is coming.

https://www.zerohedge.com/sites/default/files/inline-images/20180125_usd1.jpg

Source: ZeroHedge

Are Charts Telling Us The $USD Is Heading For Trouble?

By quick way of review, here’s the key chart. As you can see, the $USD staged a large bull market run in 2014 as the [Foreign] Federal Reserve wound down its QE program. The greenback was then range bound for three years until this month when it broke down in a big way.

https://i2.wp.com/gainspainscapital.com/wp-content/uploads/2017/08/GPC82917.png

US Dollar ($USD) dropping below critical support.

Here’s the $USD’s chart running back 40 years. I call this the “single most important chart in the world,” because how the $USD moves has a massive impact on all other asset classes.

As you can see the $USD broke out of a massive 40 year falling wedge pattern [between 2014-2016]. This initial breakout has failed to reach its ultimate target (120) and is now rolling over for a retest of the upper trendline in the mid-to low-80s.

https://i2.wp.com/gainspainscapital.com/wp-content/uploads/2017/08/GPC829172.png

The Long Term [40 year] Chart Of The $USD

Question:

What happens when new currency is created with few limits by central and commercial banks?

Answer:

Far too much debt and currency are created.

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Central Bank Balance Sheets have increased by $10 trillion in the last decade and $1 trillion YTD in 2017.

Question:

What happens when an extra $10 trillion in central bank debt plus another $80 trillion or so in other global debt is created in a decade?

Answer:

Prices rise because each unit of fiat currency purchases less.

Market                             Early 2007                                  Early 2017

NASDAQ Composite            2,400                                        6,000

S&P 500 Index                      1,400                                        2,370

T-Bond                                     110                                            150

Gold                                         700                                         1,250

Silver                                         13                                              18

Crude Oil                                  60                                              50

Now might be a good time to grab some physical gold, silver and cold stored Crypto.

Source: Political Vel Craft

 

Moscow And Beijing Join Forces To Bypass US Dollar In Global Markets, Shift To Gold Trade

The Russian central bank opened its first overseas office in Beijing on March 14, marking a step forward in forging a Beijing-Moscow alliance to bypass the US dollar in the global monetary system, and to phase-in a gold-backed standard of trade.

According to the South China Morning Post the new office was part of agreements made between the two neighbours “to seek stronger economic ties” since the West brought in sanctions against Russia over the Ukraine crisis and the oil-price slump hit the Russian economy.

According to Dmitry Skobelkin, the deputy governor of the Central Bank of Russia, the opening of a Beijing representative office by the Central Bank of Russia was a “very timely” move to aid specific cooperation, including bond issuance, anti-money laundering and anti-terrorism measures between China and Russia.

The new central bank office was opened at a time when Russia is preparing to issue its first federal loan bonds denominated in Chinese yuan. Officials from China’s central bank and financial regulatory commissions attended the ceremony at the Russian embassy in Beijing, which was set up in October 1959 in the heyday of Sino-Soviet relations. Financial regulators from the two countries agreed last May to issue home currency-denominated bonds in each other’s markets, a move that was widely viewed as intended to eventually test the global reserve status of the US dollar.

Speaking on future ties with Russia, Chinese Premier Li Keqiang said in mid-March that Sino-Russian trade ties were affected by falling oil prices, but he added that he saw great potential in cooperation. Vladimir Shapovalov, a senior official at the Russian central bank, said the two central banks were drafting a memorandum of understanding to solve technical issues around China’s gold imports from Russia, and that details would be released soon.

If Russia – the world’s fourth largest gold producer after China, Japan and the US – is indeed set to become a major supplier of gold to China, the probability of a scenario hinted by many over the years, namely that Beijing is preparing to eventually unroll a gold-backed currency, increases by orders of magnitude.

* * *

Meanwhile, as the Russian central bank was getting closer to China, China was responding in kind with the establishment of a clearing bank in Moscow for handling transactions in Chinese yuan. The Industrial and Commercial Bank of China (ICBC) officially started operating as a Chinese renminbi clearing bank in Russia on Wednesday this past Wednesday. 

“The financial regulatory authorities of China and Russia have signed a series of major agreements, which marks a new level of financial cooperation,” Dmitry Skobelkin, the abovementioned deputy head of the Russian Central Bank, said.

“The launching of renminbi clearing services in Russia will further expand local settlement business and promote financial cooperation between the two countries,” he added according to.

Irina Rogova, a Russian financial analyst told the Russian magazine Expert that the clearing center could become a large financial hub for countries in the Eurasian Economic Union.

* * *

Bypassing the US dollar appears to be paying off: according to the Chinese State Administration of Taxation, trade turnover between China and Russia increased by 34% in January, in annual terms. Bilateral trade in January 2017 amounted to $6.55 billion. China’s exports to Russia grew 29.5% reaching $3.41 billion, while imports from Russia increased by 39.3%, to $3.14 billion. Just as many suspected, with Russian sanctions forcing Moscow to find other trading partners, chief among which China, this is precisely what has happened.

The creation of the clearing center enables the two countries to further increase bilateral trade and investment while decreasing their dependence on the US dollar. It will create a pool of yuan liquidity in Russia that enables transactions for trade and financial operations to run smoothly.

In expanding the use of national currencies for transactions, it could also potentially reduce the volatility of yuan and ruble exchange rates. The clearing center is one of a range of measures the People’s Bank of China and the Russian Central Bank have been looking at to deepen their co-operation, Sputnik reported.

One of the most significant measures under consideration is the previously reported push for joint organization of trade in gold. In recent years, China and Russia have been the world’s most active buyers of the precious metal. On a visit to China last year, the deputy head of the Russian Central Bank Sergey Shvetsov said that the two countries want to facilitate more transactions in gold between the two countries.

“We discussed the question of trade in gold. BRICS countries are large economies with large reserves of gold and an impressive volume of production and consumption of this precious metal. In China, the gold trade is conducted in Shanghai, in Russia it is in Moscow. Our idea is to create a link between the two cities in order to increase trade between the two markets,” First Deputy Governor of the Russian Central Bank Sergey Shvetsov told Russia’s TASS news agency.

In other words, China and Russia are shifting away from dollar-based trade, to commerce which will eventually be backstopped by gold, or what is gradually emerging as an Eastern gold standard, one shared between Russia and China, and which may day backstop their respective currencies.

Meanwhile, the price of gold continues to reflect none of these potentially tectonic strategic shifts, just as China – which has been the biggest accumulator of gold in recent years – likes it.

Source: ZeroHedge

Dollar Drops for Second Day as Traders Rule Out June Fed Move

The dollar extended its slide for a second day as traders ruled out the possibility that the Federal Reserve will raise interest rates at its meeting next

The currency fell against all of its major peers, depressed by tepid U.S. job growth and comments by Fed Chair Janet Yellen that didn’t signal timing for the central bank’s next move. Traders see a zero percent chance the Fed will raise rates at its June 15 meeting, down from 22 percent a week ago, futures contracts indicate. The greenback posted its largest losses against the South African rand, the Mexican peso and the Brazilian real.

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“There’s a bias to trade on the weaker side in the weeks to come” for the dollar, which will probably stay in its recent range, said Andres Jaime, a foreign-exchange and rates strategist at Barclays Plc in New York. “June and July are off the table — the probability of the Fed deciding to do something in those meetings is extremely low.”

The greenback resumed its slide this month as a lackluster jobs report weakened the case for the Fed to boost borrowing costs and dimmed prospects for policy divergence with stimulus increases in Europe and a Asia. The losses follow a rally in May, when policy makers including Yellen said higher rates in the coming months looked appropriate.

The Bloomberg Dollar Spot Index declined 0.5 percent as of 9:31 a.m. New York time, reaching the lowest level since May 4. The U.S. currency slipped 0.4 percent against the euro to $1.1399 and lost 0.5 percent to 106.83 yen.

There’s a 59 percent probability the central bank will hike by year-end, futures data showed. The Federal Open Market Committee will end two-day meeting on June 15 with a policy statement, revised economic projections and a news conference.

“Until the U.S. economy can make the case for a rate rise, the dollar will be at risk of slipping further,” said Joe Manimbo, an analyst with Western Union Business Solutions, a unit of Western Union Co., in Washington. The Fed’s “economic projections are going to be key, as well as Ms. Yellen’s news conference — if they were to sketch an even shallower path of rate rises next week, that would add fuel to the dollar’s selloff.”

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by Lananh Nguyen | Bloomberg News

Is This The End Of The U.S Dollar? Geopolitical Moves “Obliterate U.S Petrodollar Hegemony “

https://i2.wp.com/shtfplan.com/wp-content/uploads/2014/09/king-dollar.jpgIt seems the end really is nigh for the U.S. dollar.

And the mudfight for global dominance and currency war couldn’t be more ugly or dramatic.

The Saudis are now openly threatening to take down the U.S. economy in the ongoing fallout over collapsing oil prices and tense geopolitical events involving the 9/11 cover-up. The New York Times reports:

Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.

China has been working for years to establish global currency status, and will strengthen the yuan by backing it with gold in moves clearly designed to cripple the role of the dollar. Zero Hedge reports:

China’s shift to an official local-currency-based gold fixing is “the culmination of a two-year plan to move away from a US-centric monetary system,” according to Bocom strategist Hao Hong. In an insightfully honest Bloomberg TV interview, Hong admits that “by trading physical gold in renminbi, China is slowly chipping away at the dominance of US dollars.”

Putin also waits in the shadows, making similar moves and creating alliances to out-balance the United States with a growing Asian economy on the global stage.

Luke Rudkowski of WeAreChange asks “Is This The End of the U.S. Dollar?” in the video below.

He writes:

In this video Luke Rudkowski reports on the breaking news of both China and Saudi Arabia making geopolitical moves that could cause a U.S economic collapse and obliteration of the U.S hegemony petrodollar. We go over China’s new gold backed yuan that cannot be traded in U.S dollars and rising tension with Saudi Arabia threatening economic blackmail if their role in 911 is exposed.

Visit WeAreChange.org where this video report was first published.

The Federal Reserve, Henry Kissinger, the Rockefellers and their allies created the petrodollar and insisted upon the world using the U.S. dollar to buy oil, placing debt in American currency and entire countries under the yoke of the West.

But that paradigm has been crumbling as world order shifts away from U.S. hegemony.

It is a matter of when – not if – these events will change the U.S. financial landscape forever.

As SHTF has warned, major events are taking place, and no one can say if stability will be here tomorrow.

Stay vigilant, and prepare yourself and your family as best as you can.

Read more:

Pay Attention To The Economy Right Now, Because A Disturbing Series Of Events Seems To Be In Motion

Here’s How We Got Here: A Short Primer On The History Of The Petrodollar

Shock Report: China Dumps Half a Trillion Dollars: “Something Is Very, Very Wrong”

Dollar Moves Shake the World: “Federal Reserve Could Start a Currency War”

by Mac Salvo | SHTF Plan