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U.S. Dollar decline: Beginning of the end of the world reserve currency and weapon of mass starvation?

Viral

Active Member

Dollar Sends Warning That U.S. Is Losing Its Grip on the Virus

The dollar is flashing a warning sign to U.S. policy makers -- get a grip on the virus.

After hitting an all-time high in March, a gauge of the greenback lost 10% of its value, with declines accelerating in recent weeks as infections spread seemingly unchecked across the nation. Much of the sell-off has come during New York trading hours, suggesting domestic investors are closing out bets on U.S. strength and spurring renewed questions about the supremacy of the dollar. Meanwhile, a popular model that’s guided dollar traders for the past two decades has warped.
It’s a rapid reversal in fortune. Early on in the pandemic, the dollar soared after investors sought safety in U.S. assets like Treasuries while the virus stormed through Europe. But with cases now exploding at home, the ineffectual American response to the disease has become a millstone for the currency, spurring concern about lasting damage to the U.S. economy that could keep interest rates and growth low for years.
“What people are most desperately waiting for is good news on virus control, that I think is number one,” said Stephen Jen, chief executive at Eurizon SLJ Capital Ltd. “The currency bet is mainly a bet on relative control of the virus, not reflecting the fundamental strength of the economies in question.”

Greenback suffers 10% drop from year's high

The U.S. government’s handling of the pandemic -- which contrasts with the euro area’s progress in containing infections -- is now the key driver of the greenback, dictating more conventional spurs of the currency, such as relative growth or monetary policy.
Read More: Europe’s Economy to Outpace U.S. in Upending of Past Roles
The dollar’s losses have often deepened during the U.S. trading day, suggesting investors were selling after the latest virus figures were released. Speculators are now the most short since November 2017, after betting on strength for almost all of last year. The Bloomberg Dollar Spot Index rose 0.5% Monday after sliding more than 3% in July, the worst monthly performance since January 2018.
Still, prior to the dollar’s slump to a two-year low in July, Stephen Jen was bullish. A pioneer of the so-called dollar smile theory -- which posits that the dollar will gain as a result of either U.S. growth exceeding that of other nations or during risk aversion -- Jen predicted in June that the currency would bounce back as the U.S. economy rebounded.
Instead, the dollar has languished as rising infections simultaneously put the kibosh on a boost for growth and sapped appetite for the currency as a haven. Over the weekend, the number of cases in California climbed by more than the 14-day average and New Jersey’s transmission rate crept higher. Meanwhile, House Speaker Nancy Pelosi cast doubt over information from Deborah Birx, who heads the White House virus task force.
“The key assumption I was making, which turned out not to be correct, was that the U.S. would sort itself out after a difficult period,” Jen said.
Policy Subsumed
The euro area has only outperformed the U.S. in eight years since 1992, according to IMF data, but 2020 is on that track.
American gross domestic product suffered its deepest quarterly contraction since at least the 1940s in the three months through June, a release showed Thursday. While Europe’s economy was also eviscerated, with output shrinking to levels not seen since 2005, recent data show signs of a rebound as lockdowns ease across the region.
Final prints for manufacturing purchasing managers’ indexes for the euro-area, Germany and France came above flash estimates on Monday, while readings for Spain and Italy beat expectations. Meanwhile, European governments have -- so far -- kept a lid on new infections.
That hasn’t been lost on the Federal Reserve, with Chairman Jerome Powell saying after the central bank’s latest meeting that the path forward for the U.S. economy will largely depend on America’s success in “keeping the virus in check.” While policy makers have not explicitly linked rates to controlling Covid-19, the broader effort to curb the pandemic is influencing the outlook for both monetary policy and economic growth.
“I’m much more confident about the ‘left’ side of the smile: that is, the dollar performing in a risk-off environment, than I am on the other side, which is classically driven by a U.S. economic outperformance,” said Ross Hutchison, investment director for Standard Life Investments.
But others aren’t convinced that even this side of the framework holds up. The dollar smile has flattened and turned into a painful “grin,” according to Calvin Tse, a foreign-exchange strategist at Citigroup Inc., with the flood of liquidity unleashed by the Fed diminishing the likelihood of a sudden rush to the dollar in a risk-off scenario.

CitiFX

The dollar smile is becoming a grin, according to Citigroup
While Tse doesn’t rule out gains for the dollar, any haven rally is likely to be shallower than in previous years thanks to these measures, while the possible extent of depreciation remains the same. Meanwhile, in the event that U.S. growth returns, aggressive rate cuts have enhanced foreign investors’ appetite for hedging dollar exposure when buying Treasuries, further hurting the case for the dollar to strengthen, he wrote in a report July 29.
For some, then, it’s time to better reflect the influence of the virus in their strategies. Paresh Upadhyaya, money manager at Amundi Pioneer Asset Management, which has $78 billion under management, says accounting for the virus has taken on a bigger role in shaping his view of the dollar and the economy.
To keep tabs on the virus’s ongoing impact Upadhyaya has created a spreadsheet of data points, including activity at airport security checkpoints, restaurant reservations, small business openings, small business revenue and employment. He also tracks traditional data on manufacturing and services, and uses mobility data produced by Apple Inc. and Google parent Alphabet Inc. to gauge state reopenings.
“As cases in the U.S. have picked up, that’s a flag for the dollar,” Upadhyaya said. “Because currency is the perfect reflection of relative value, we use that to gauge which region is having a better handle over the virus.”

— With assistance by Alyce Andres, and Anchalee Worrachate
 

Viral

Active Member
5 links from RT.com ...always makes me wonder if i am in a bubble if all my news comes from the same source ...any 1 source alone is a bad one read other opinions. The truth is almost always somewhere in between.
You didn't like what Elon Musk said so let's kill the messenger:cigar:
 

Mrsrx

Not an expert!
Staff member
RT is very trustworthy. As trustworthy as the Chinese Communist Party newsletters that another forum member was using to explain Covid did not originate in China.
Don't believe these leftist cry babies that tell you RT is a propaganda machine at the service of the Kremlin and just focused on enabling populists and sowing division in western democracies.
It is worth reading along with other sources on the opposite side to understand the vibe and the attacks but relying on RT is like relying on NBN or FOX for your news... :D
 

Mrsrx

Not an expert!
Staff member
You didn't like what Elon Musk said so let's kill the messenger:cigar:
haha i do not have an opinion on what Musk i think there is a truth in it somewhere but he i guess all that enthusiasm in china is not worth it with their current laws (chinese gov is allowed access to all the comoanies patents and data....)
 

Mrsrx

Not an expert!
Staff member
You failed to mention CNN:cool:
Well CNN is not great neither is MSNBC but sometimes you go to the extremes to make your point without having to list the full comprehensive list on news channels 3a boukrit el sobe7
 

Viral

Active Member
haha i do not have an opinion on what Musk i think there is a truth in it somewhere but he i guess all that enthusiasm in china is not worth it with their current laws (chinese gov is allowed access to all the comoanies patents and data....)
Enthusiasm is not my game:cigar:
 

Viral

Active Member
Well CNN is not great either is MSNBC but sometimes you go to the extremes to make your point without having to list the full comprehensive list on news channels 3a boukrit el sobe7
I'm not here to defend RT in any shape or form but let's take an example: If you were to read a story about Trump, between FOX, CNN and RT, which one do you trust to be most balanced or at least the least biased?
 

Mrsrx

Not an expert!
Staff member
I'm not here to defend RT is any shape or form but let's take an example: If you were to read a story about Trump, between FOX, CNN and RT, which one do you trust to be most balanced or at least the least biased?
Well as i already said the truth is usually somewhere in between i try to average it out...generally because they all play the clickbait and sensationalism game...
One of the newspapers i kind of trust is lemonde.fr but still i try to read another source for important news
 

Viral

Active Member
Well as i already said the truth is usually somewhere in between i try to average it out...generally because they all play the clickbait and sensationalism game...
One of the newspapers i kind of trust is lemonde.fr but still i try to read another source for important news
The veracity of the articles I post is verifiable, I'm more interested in the messenger rather the message. RT seems to report more interesting and balanced news about the US than CNN who is busy attacking Trump. RT is under the microscope by the US information ACT and are very careful not to be banned which made them one of the most reliable information sources in the US.
 

Mrsrx

Not an expert!
Staff member
The veracity of the articles I post is verifiable, I'm more interested in the messenger rather the message. RT seems to report more interesting and balanced news about the US than CNN who is busy attacking Trump. RT is under the microscope by the US information ACT and are very careful not to be banned which made them one of the most reliable information sources in the US.
So they are writing what the US allows them to write coming from the Russian ministry. That is not the definition independent press.
Anyway my comment on this thread was to point out that there is some not healthy in using 1 source (any single source RT or other)... I am not here to change your mind i am just rebalancing the thread by pointing out maybe the obvious.

Regarding veracity what you said is true but if i say "Viral will most likely fall in love with other news sources"
Titles can be:
Viral will fall
Viral looks at other news sources
Viral dumps RT.com
Viral in love?
Virals future is uncertain

all true but the phrasing and the vibe is different and that is what sensationalism is
 

Frisbeetarian

Legendary Member
A lower currency exchange rate is generally better for exports. If the USA is truly reindustrilizing ( as Trump claims ) their economy and can hold the USD at a stable cheaper level...This will benefit them as their exports would rival Asian exports (costs going up in Asia)...If you de-dollarise you will need to jump on another currency that will mathematically go up and make exports more expensive (unless they print a lot like what the US has already done)

Do not jump the gun many forecasted the fall of the US economy for decades but along with their strong economical allies (EU + Korea + Japan + India.....) they still command a huge currency and economic market share which is a huge advantage going forward. If this is true it is a very long term thing and the fed still has the ability to fight back and to lower its balance.

60% of Americans have 800$ or less in the bank. Your conclusion makes sense had the U.S retained a strong and expanding middle class.
 

Viral

Active Member

Dollar could be a ‘crash risk’ if U.S. loses ‘credibility,’ analyst warns

The U.S. dollar began August with a bounce after suffering its worst monthly fall in just shy of a decade, but it did little to dissuade bears who are looking for further weakness in the greenback.

“We expect the currency to be undermined by an ebbing of safe-haven flows, a reduction in the U.S. rate advantage, and political uncertainty ahead of the November presidential election,” wrote analysts at UBS, in a note last week.

The ICE U.S. Dollar Index DXY, -0.34%, a measure of the currency against a basket of six major rivals, fell 4.2% in July, its biggest one-month decline since September 2010, according to FactSet data, trading Friday at its lowest in more than two years.
The index caught a 0.3% bounce on Monday to around 93.599. Data last week from the Commodity Futures Trading Commission, meanwhile, showed that the dollar is well out of favor with speculative traders — a factor that may have left the currency ripe for at least a near-term bounce. Extreme speculative positioning is often a contrarian signal.

But what may be unnerving over the long term, argued Steven Barrow, head of G-10 strategy at Standard Bank, is that the dollar’s weakness versus developed currencies comes at a time of heightened global uncertainty surrounding the COVID-19 pandemic. Usually, the dollar behaves “a bit better” against its developed-economy peers during a crisis, he said, in a Friday note.
Barrow worried that the combination of rising economic and political uncertainty amid the COVID-19 pandemic and ahead of the November presidential election could pose a “crash risk” — a danger more often associated with emerging-market currencies.
The dollar has held up well versus emerging-market currencies, Barrow acknowledged, which means the risk may be mainly against other developed-world currencies, like the euro EURUSD, 0.12%, Japanese yen USDJPY, -0.02% and Swiss franc USDCHF, -0.15%,

Why the danger? Barrow argued that rate cuts and other easing measures by the Federal Reserve and the drop in Treasury yields to or near all-time lows has significantly reduced the U.S. rate premium versus other “safe” currencies.

But what’s really important, he said, are other factors, like the liquidity of assets, particularly government bonds. The near-freeze-up of the U.S. Treasury market at the height of the coronavirus crisis earlier this year marked a “bit of a wobble,” he said, which could be a problem if it makes traders and investors reluctant to head for Treasurys in the event of another risk-off event — a development that would allow the dollar to suffer.

And then there’s the election. President Donald Trump on Thursday raised the question of delaying the vote, alleging the potential for fraud around mail-in ballots despite a lack of evidence.

While the vote is virtually certain to proceed on Nov. 3, the suggestion “is just another indication that the election won’t be as smooth as we’re used to in a developed country ,” Barrow said. “And, if [Trump] refuses to leave office after a — disputed — defeat, it could really damage the credibility of the U.S. on a global scale. ”

Barrow pointed to the chart below, tracking the popular Economic Uncertainty Index, which shows U.S. uncertainty has soared to levels similar to those in the rest of the world. U.S. uncertainty had been significantly below global levels before the pandemic.

There are other factors that could lead to dollar weakness, as well, but the underlying question is, “Can the dollar be trusted?” he said. “For if trust has disappeared in the U.S.’s economy, policy making, election credibility and more, then the dollar could be in for a slump, at least against other major currencies. ”

1596615066737.png
 

proIsrael-nonIsraeli

Legendary Member

Dollar could be a ‘crash risk’ if U.S. loses ‘credibility,’ analyst warns

The U.S. dollar began August with a bounce after suffering its worst monthly fall in just shy of a decade, but it did little to dissuade bears who are looking for further weakness in the greenback.

“We expect the currency to be undermined by an ebbing of safe-haven flows, a reduction in the U.S. rate advantage, and political uncertainty ahead of the November presidential election,” wrote analysts at UBS, in a note last week.

The ICE U.S. Dollar Index DXY, -0.34%, a measure of the currency against a basket of six major rivals, fell 4.2% in July, its biggest one-month decline since September 2010, according to FactSet data, trading Friday at its lowest in more than two years.
The index caught a 0.3% bounce on Monday to around 93.599. Data last week from the Commodity Futures Trading Commission, meanwhile, showed that the dollar is well out of favor with speculative traders — a factor that may have left the currency ripe for at least a near-term bounce. Extreme speculative positioning is often a contrarian signal.

But what may be unnerving over the long term, argued Steven Barrow, head of G-10 strategy at Standard Bank, is that the dollar’s weakness versus developed currencies comes at a time of heightened global uncertainty surrounding the COVID-19 pandemic. Usually, the dollar behaves “a bit better” against its developed-economy peers during a crisis, he said, in a Friday note.
Barrow worried that the combination of rising economic and political uncertainty amid the COVID-19 pandemic and ahead of the November presidential election could pose a “crash risk” — a danger more often associated with emerging-market currencies.
The dollar has held up well versus emerging-market currencies, Barrow acknowledged, which means the risk may be mainly against other developed-world currencies, like the euro EURUSD, 0.12%, Japanese yen USDJPY, -0.02% and Swiss franc USDCHF, -0.15%,

Why the danger? Barrow argued that rate cuts and other easing measures by the Federal Reserve and the drop in Treasury yields to or near all-time lows has significantly reduced the U.S. rate premium versus other “safe” currencies.

But what’s really important, he said, are other factors, like the liquidity of assets, particularly government bonds. The near-freeze-up of the U.S. Treasury market at the height of the coronavirus crisis earlier this year marked a “bit of a wobble,” he said, which could be a problem if it makes traders and investors reluctant to head for Treasurys in the event of another risk-off event — a development that would allow the dollar to suffer.

And then there’s the election. President Donald Trump on Thursday raised the question of delaying the vote, alleging the potential for fraud around mail-in ballots despite a lack of evidence.

While the vote is virtually certain to proceed on Nov. 3, the suggestion “is just another indication that the election won’t be as smooth as we’re used to in a developed country ,” Barrow said. “And, if [Trump] refuses to leave office after a — disputed — defeat, it could really damage the credibility of the U.S. on a global scale. ”

Barrow pointed to the chart below, tracking the popular Economic Uncertainty Index, which shows U.S. uncertainty has soared to levels similar to those in the rest of the world. U.S. uncertainty had been significantly below global levels before the pandemic.

There are other factors that could lead to dollar weakness, as well, but the underlying question is, “Can the dollar be trusted?” he said. “For if trust has disappeared in the U.S.’s economy, policy making, election credibility and more, then the dollar could be in for a slump, at least against other major currencies. ”

View attachment 20297

"Dollar could be a ‘crash risk’ if U.S. loses ‘credibility,’ analyst warns" - seriously! Is that how it works, Captain Obvious!

BTW, I would've replaced "could be" with "will be" - changes nothing, but looks so much more certain.
 

Viral

Active Member

Hedge funds are reportedly shorting the dollar as fears rise over its status as the world's number one currency

Saloni Sardana
Aug. 17, 2020,

FILE PHOTO: A U.S. Dollar banknote is seen in this illustration taken May 26, 2020. REUTERS/Dado Ruvic/Illustration
Reuters

  • Hedge funds are net short against the dollar for the first since May 2018 amid extreme weakness, Bloomberg reported Monday.
  • The greenback has fallen about 6% against the euro alone since the start of the year.
  • Big government and central bank spending has pushed interest rates down and weakened the dollar.
Hedge funds are shorting the dollar and are bearish on the greenback for the first time since May 2018 in the latest sign that the world's top reserve currency is declining further and unlikely to bounce back any time soon.
Bloomberg reported Monday, citing data from the Commodity Futures Trading Commission, that net futures and forward positions held by leveraged funds against eight currencies not including the dollar, fell to negative 7,881 contracts last week.
That means that more investors are betting against the dollar than on it right now. Bloomberg said the shorting spree was driven by bullish bets on the euro.

The euro has outperformed the dollar by 6% since the start of the year. Currently the euro is roughly worth $1.18.
The dollar has been weakening since the peak of the COVID-19 crisis
The revelation comes after months of dollar weakness. The bearishness has partly been attributed to the Fed's massive coronavirus stimulus programmes.

Expansionary monetary and fiscal policy tends to drive down bond yields, and lower interest rates. A lower interest rate makes saving in US dollars less attractive.
While investors initially flocked to safe havens such as the dollar at the start of the coronavirus pandemic, this has dissipated in recent months.

The Dollar Index has fallen 9% since March and as of Monday is trading at around 93.05.
The dollar weakness is said to be another key reason why investors have piled into gold. A weaker dollar means they can purchase larger quantities of the precious metal more cheaply.

Looking ahead traders and policymakers anticipate the policy rate to not change until earliest the end of 2021 and Bloomberg economists expect an uptick in inflation at the start of next year.
Dollar weakness has caught market participants off guard across both sides of the Atlantic.

Win Thin, global head of markets strategy at Brown Brothers Harriman warned last week "the stars are aligned against" the world's top reserve currency.
Thin said US' handling of the coronavirus pandemic has had a drag on investor confidence in the dollar.
"This is one of the rare occasions when Europe will actually outperform the US," the strategist said in a CNBC "Trading Nation" interview. "
 

Viral

Active Member


INTERNATIONAL RELATIONS
China and Russia ditch dollar in move toward 'financial alliance'
Greenback's share of neighbors' trade falls below 50% for first time


China and Russia have roughly halved their use of the dollar in trade settlements over the past five years. (Source photo by AP)

MOSCOW -- Russia and China are partnering to reduce their dependence on the dollar -- a development some experts say could lead to a "financial alliance" between them.
In the first quarter of 2020, the dollar's share of trade between Russia and China fell below 50% for the first time on record, according to recent data from Russia's Central Bank and Federal Customs Service.
The greenback was used for only 46% of settlements between the two countries. At the same time, the euro made up an all-time high of 30%, while their national currencies accounted for 24%, also a new high.

Russia and China have drastically cut their use of the dollar in bilateral trade over the past several years. As late as 2015, approximately 90% of bilateral transactions were conducted in dollars. Following the outbreak of the U.S.-China trade war and a concerted push by both Moscow and Beijing to move away from the dollar, however, the figure had dropped to 51% by 2019.
Alexey Maslov, director of the Institute of Far Eastern Studies at the Russian Academy of Sciences, told the Nikkei Asian Review that the Russia-China "dedollarization" was approaching a "breakthrough moment" that could elevate their relationship to a de facto alliance.



"The collaboration between Russia and China in the financial sphere tells us that they are finally finding the parameters for a new alliance with each other," he said. "Many expected that this would be a military alliance or a trading alliance, but now the alliance is moving more in the banking and financial direction, and that is what can guarantee independence for both countries."
Dedollarization has been a priority for Russia and China since 2014, when they began expanding economic cooperation following Moscow's estrangement from the West over its annexation of Crimea. Replacing the dollar in trade settlements became a necessity to sidestep U.S. sanctions against Russia.
"Any wire transaction that takes place in the world involving U.S. dollars is at some point cleared through a U.S. bank," explained Dmitry Dolgin, ING Bank's chief economist for Russia. "That means that the U.S. government can tell that bank to freeze certain transactions."
The process gained further momentum after the Donald Trump administration imposed tariffs on hundreds of billions of dollars worth of Chinese goods. Whereas previously Moscow had taken the initiative on dedollarization, Beijing came to view it as critical, too.
"Only very recently did the Chinese state and major economic entities begin to feel that they might end up in a similar situation as our Russian counterparts: being the target of the sanctions and potentially even getting shut out of the SWIFT system," said Zhang Xin, a research fellow at the Center for Russian Studies at Shanghai's East China Normal University.
In 2014, Russia and China signed a three-year currency swap deal worth 150 billion yuan ($24.5 billion). The agreement enabled each country to gain access to the other's currency without having to purchase it on the foreign exchange market. The deal was extended for three years in 2017.
Another milestone came during Chinese President Xi Jinping's visit to Russia in June 2019. Moscow and Beijing struck a deal to replace the dollar with national currencies for international settlements between them. The arrangement also called for the two sides to develop alternative payment mechanisms to the U.S.-dominated SWIFT network for conducting trade in rubles and yuan.


Russian President Vladimir Putin hosts his Chinese counterpart, Xi Jinping, in June 2019. © Reuters

Beyond trading in national currencies, Russia has been rapidly accumulating yuan reserves at the expense of the dollar. In early 2019, Russia's central bank revealed that it had slashed its dollar holdings by $101 billion -- over half of its existing dollar assets. One of the biggest beneficiaries of this move was the yuan, which saw its share of Russia's foreign exchange reserves jump from 5% to 15% after the central bank invested $44 billion into the Chinese currency.
As a result of the shift, Russia acquired a quarter of the world's yuan reserves.
Earlier this year, the Kremlin granted permission to Russia's sovereign wealth fund to begin investing in yuan and Chinese state bonds.
Russia's push to accumulate yuan is not just about diversifying its foreign exchange reserves, Maslov explained. Moscow also wants to encourage Beijing to become more assertive in challenging Washington's global economic leadership.
"Russia has a considerably more decisive position toward the United States [than China does]," Maslov said. "Russia is used to fighting, it does not hold negotiations. One way for Russia to make China's position more decisive, more willing to fight is to show that it supports Beijing in the financial sphere."
Dethroning the dollar, however, will not be easy.
Jeffery Frankel, an economist at Harvard University, told Nikkei that the dollar enjoys three major advantages: the ability to maintain its value in the form of limited inflation and depreciation, the sheer size of the American domestic economy, and the United States having financial markets that are deep, liquid and open. So far, he argued, no rival currency has shown itself capable of outperforming the dollar on all three counts.
Yet Frankel also warned that while the dollar's position is secure for now, spiraling debts and an overly aggressive sanctions policy could erode its supremacy in the long run.
"Sanctions are a very powerful instrument for the United States, but like any tool, you run the risk that others will start looking for alternatives if you overdo them," he said. "I think it would be foolish to assume that it's written in stone that the dollar will forever be unchallenged as the number one international currency."
 
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