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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    AEP: US dollar plunges as world plays dangerous game of pass the parce

    Proven
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    AEP: US dollar plunges as world plays dangerous game of pass the parce Empty AEP: US dollar plunges as world plays dangerous game of pass the parce

    Post by Proven Thu 05 May 2016, 7:43 pm


    AEP: US dollar plunges as world plays dangerous game of pass the parcel





    AEP: US dollar plunges as world plays dangerous game of pass the parce Yellen-xlarge_trans++NUHzxaamNmHDqK-YksWRz2o-yMLyYquKCawpyDOW254Markets are betting that the Fed's Janet Yellen will never turn tough. They may be wrong CREDIT: JACQUELYN MARTIN/AP PHOTO




    3 MAY 2016 • 7:39PM
    [size=118]The US dollar has plunged to a 16-month low in the latest wild move for the global financial system, tightening the currency noose on the eurozone and Japan as they struggle to break out of a debt-deflation trap.[/size]
    The closely-watched dollar index fell below 92 for the first time since January 2015, catapulting gold through $1300 an ounce in early trading and setting off steep falls on stock markets in Asia and Europe. 
    The latest data from the US Commodity Futures Trading Commission shows that speculative traders have switched to a net "short" position on the dollar.
    This is a massive shift in sentiment since the end of last year when investors were betting heavily that the US Federal Reserve was on track for a series of rate rises, which would draw a flood of capital into dollar assets.
    Markets have now largely discounted a rate rise in June, and are pricing in just a 68pc likelihood of any increases this year.
    The dollar slide has been a lifeline for foreign borrowers with $11 trillion (£7.5 trillion) of debt in US currency, notably companies in China, Brazil, Russia, South Africa, and Turkey that feasted on cheap US liquidity when the Fed spigot was open, and were then caught in a horrible squeeze when the Fed turned to tap off again  and the dollar surged in 2014 and 2015.

    AEP: US dollar plunges as world plays dangerous game of pass the parce Dxy_2-large_trans++5dd29MwfFMR1mtnyLmH6Ggiql1Ytv87G6Qi7fNC82r4The dollar index has plunged as markets call the Fed's bluff CREDIT: STOCKCHARTS.COM

    But it increases the pain for the eurozone and Japan as their currencies rocket. The world is in effect playing a high-stakes game of pass the parcel, with over-indebted countries desperately trying to export their deflationary problems to others by nudging down exchange rates.
    The Japanese yen appreciated to 105.60, the strongest since September 2014 and a shock to exporters planning on an average of this 117.50 this year. The wild moves over recent weeks have blown apart the Japan’s reflation strategy. Analysts from Nomura said Abenomics is now “dead in the water”.
    The eurozone is also in jeopardy, despite enjoying a sweet spot of better growth in the first quarter. The euro touched $1.16 to the dollar early in the day. It has risen over 7pc in trade-weighted terms since the Europe Central Bank first launched quantitative easing in a disguised bid to drive down the exchange rate.

    AEP: US dollar plunges as world plays dangerous game of pass the parce Euro_trad-large_trans++51xurVIoqhqRAGUjnLq19USY4L_uZbX2J0tItxocMLEThe euro trade-weighted index has been rising ever since QE began, much to the horror of EU leaders CREDIT: ECB

    Prices fell by 0.2pc in April and deflation is becoming more deeply-lodged in the eurozone economy, with no safety buffers left against an external shock. The European Commission this week slashed its inflation forecast to 0.2pc this year from 1.0pc as recently as November.
    There is little that the Bank of Japan or the ECB can do to arrest this unwelcome appreciation. The Obama Administration warned them at the G20 summit in February that it any further use of negative interest rates would be regarded by Washington as covert devaluation, and would not be tolerated.
    “These central banks have reached the limits of what they can do with monetary policy to influence their exchange rates, and this is putting their entire models at risk,” said Hans Redeker, currency chief at Morgan Stanley.
    “Europe and Japan are operating in a Keynesian liquidity trap. We are nearing a danger point like 2012 when it could lead to an asset market sell-off. We’re not there yet,” he said.

    AEP: US dollar plunges as world plays dangerous game of pass the parce Anz-large_trans++VnGZDHLVbaDWtLqzwQh5-T_bx26tsftpYlfDzFNDoFUSpeculators are now betting that the dollar will fall, a dramatic shift in sentiment CREDIT:ANZ RESEARCH

    Stephen Jen from SLJ Macro Partners said the Fed is pursuing a “weak dollar policy”, reacting to global events in a radical new way.    “They are forcing currency appreciation onto weaker economies. It is irrational,” he said.
    Yet it may not last long if the US economy comes roaring back in the second quarter a after a soft patch. “I doubt this is really the end of multi-year run for the dollar,” he said.
    Neil Mellor from BNY Mellon says the soaring euro is in the end self-correcting since the eurozone cannot withstand the pain for long, and as this becomes evident the this the currency will start sliding again.
    Mr Mellor said BNY’s custodial flow data has picked up a surge in outflows of capital by ‘real-money investors’ from the eurozone over the last eight weeks, especially from Spain and Portugal where politics has turned fractious. 
    This suggests that short-term speculative flows are at this point driving up the euro. BNY has $29 trillion of assets under custody – the world’s biggest – and has a unique insight into underlying flows.

    AEP: US dollar plunges as world plays dangerous game of pass the parce Bny-large_trans++bh83xQqW0npElK_R5P3zKwzYvz6lqF4RtCYH3F14EngUnderlying investment flows show that capital is leaving the eurozone, yet speculators are still bidding up the euro CREDIT: BNY MELLON

    The fate of the dollar now hinges on the Fed. Markets are betting that chairwoman Janet Yellen will continue to hold fire, but this could be a misjudgement.
    Boston Fed chief Eric Rosengren, a long-time dove, has warned twice over recent days that markets underestimating the pace of rate rises this year. The warnings were echoed by the Dallas Fed chief Robert Kaplan in London on Friday.
    A key reason for the Fed’s retreat in March was a tightening in financial conditions – worth three rate rises in the words of Fed governor Lael Brainard – but this has since reversed. The panic over China has subsided. Commodities have begun to recover. The weaker dollar is itself a shot in the arm for the US.
    Professor Tim Duy from Fed Watch said the institution is itching to return to plan with three quarter-point rate rises, preferably as soon as June, September, and December, knowing that any further delay could leave it behind the curve.
    “Be forewarned. If the data shifts, they will be looking hard at June. I would not be surprised to see the doves shedding their feathers to reveal the hawk beneath,” he said.
    If Professor Duy is right, the dollar could come back with a vengeance, and a great number of hedge funds and speculators may be caught on the wrong side of some very large bets on currencies, bonds, and equities across the world.


    http://www.telegraph.co.uk/business/2016/05/03/aep-us-dollar-plunges-as-world-plays-dangerous-game-of-pass-the/
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