Almighty dollar

“Our dollar, your problem,” a US Treasury Secretary said in the 1970s. Obviously the world is happy to have the $ as a problem.

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US$ decline ended?

The mighty S$

As a S’porean, I’m surprised that M$ is doing pretty well against the US$. It’s not a banana currency.

Seriously, I’m surprised that the rupiah is so firm. Likewise the rupee.

Once upon a time the Russians were buying US$

Shows that Putin is a lousy chess player.

Russian markets tank while US markets say “What’s the big deal?”

S&P closed up 1.5% and NASDAQ was up 3.3% (OK, OK, they were down 2.6% and 3.4% earlier in the day).

The dollar index rose 0.8% as market stress drove up demand for the reserve currency.

Meanwhile celebrating Putin’s antics, the Moex index briefly fell 45% before recovering to close 33 % lower.

The Rouble fell to almost 90 to the dollar before recovering to 85.2.

Dealers were pricing Russian 10-year bonds with yields as high as 15% — up from less than 11% on Tuesday. (Wednesday was a public holiday)

The fall of Kabul compared to fall of Saigon

On the internet and social media, experts and cybernuts are comparing the fall of Kabul to the Taliban to the fall of Saigon to the North Vietnamese. To summarise they are saying that the US is in terminal decline. No country can rely on US assurances anymore.

Let’s take the analogy further shall we? The chattering classes and even experts said the US of A was in terminal decline in 1975.

Well a few years later, we had the Reagan presidency (“Good morning America”), the Bush presidency and then the US won the Cold War. Some terminal decline. LOL.

It was the unchallenged Hegemon. THE USSR had collapsed.

So using the analogy, of another US evacuation (and humiliation), we should be predicting the US’s return as top dog again, shouldn’t we?

I’m not predicting that American will again be the undisputed Hegemon as it was in the 1990s and that Xi or his successor will be kissing Potus’s ass in 15 years time.

I’m saying let’s not make false analogies.

My personal view was that the US should have left the Afghanistan a long time ago. Let the Afghans kill themselves.

Btw, the squandering of US$1tn shows the continued hegemony of the US dollar. We all paid for the war because US dollar is the world’s main reserve and trade currency. America can borrow from the rest of the world at negative real interest rates, especially given the savings rate of the Chinese.

Now that is Hegemony at work. Xi can only bang his balls.

Everyone’s wrong about the US$

Strong US$ is another reason for gold’s weakness. Other reasons are rising interest rates, and Bitcoin usurping its place as a safe haven

S$ tua kee

But three other currencies bigger tua kees

I’m surprised TOC’s M’sian Indian goons not using this data to diss the PAP govt. They would say that if PAP any gd, should be first.

Vote wisely.

Chill wind from emerging mkts

Is winter coming?

If the US$ strengthens, developing countries will be in trouble because foreign currency debts (i.e. US$ bebts mainly) are falling due big time next year.

 

 

 

 

 

 

 

 

 

 

 

 

And many may not have the $. M’aia and Indon are OK. Lots of reserves.

 

 

 

 

 

 

 

 

 

 

 

 

FYI

Higher oil prices and regional economies

Regional currencies will weaken again US$. Trump will not be happy.

The probability or possibility (?) of weaker economic activity due to stronger prices oil should mean that our central bank is likely to allow the S$ to weaken. Meanwhile, central banks such as those in South Korea and Thailand are more likely to cut interest rates, weakening their currencies, analysts pointed out.

Analysts at Citi said because of Indonesia and India’s current account deficits and reliance on crude imports, the currencies of Indonesia and India were among those most exposed to oil shocks,

Chaos can be good for S$, PM, PAP

I kid u not.

HK$ rose against US$ despite the protests and riots that created economic uncertainty. Hmm maybe Mad Dog in power could be good for S$.

S’pore, Asean in trouble if Renminbi collapses below 7 to US$

Further to Trump’s US$ trumps Xi’s Renminbi

if the renminbi breaks thru  7 to the US$, this has

broader repercussions for other emerging market countries, already under pressure. This includes the likes of Indonesia, India and the Philippines. India’s rupee has slumped some 15 per cent to a record low versus the dollar this year. Other China-linked exporters such as Singapore, South Korea, Thailand and Malaysia would also see their currencies come under pressure. Then there’s the Australian dollar, seen as a more liquid proxy to play China and its economic outlook along with copper and other industrial metals — today the Aussie dropped to a new two-year low just above $0.70.

FT’s Market Forces

Trump’s US$ trumps Xi’s Renminbi

Yesterday, the renminbi touched Rmb6.9462 to the dollar, its weakest level since 2008 on Friday.

The cont’d rise and then collapse of renminbi during Xi’ reign (starting in Nov 2012). When Trump became president the renminbi rose, then collapsed.

Paper Trump hates analyses effect of Trump on US$ and equity mkt

From NYT’s Dealbook   In the Age of Trump, the Dollar No Longer Seems a Sure Thing By PETER S. GOODMAN Long the ultimate safe haven in the global economy, the U.S. dollar may be losing some status as investors grapple with an uncertain political climate.

And

 

Financial markets are reaching new highs, and enthusiasm about the business environment appears to be strong: Does that have anything to do with President Trump?

The administration has been unable to pass any meaningful legislation on major campaign promises and its trade agenda has stalled, frustrating steelworkers and others in industries the president vowed to protect.

Mr. Trump’s supporters have pointed to the bevy of executive orders that he has signed and his efforts to roll back regulations.

America’s largest corporations, however, are not citing rollbacks as the reason for their improved results.

“The administration is, at a minimum, telling a one-sided story — it’s a bit disingenuous,” Charles Campbell, managing director at MKM Partners, said about Mr. Trump and his team’s taking credit for the rising stock market.

Mr. Campbell said it is “a little early” for companies to see any direct benefits from Mr. Trump’s deregulation efforts.

Wny no need for S$ appreciation

S$ up 6% against US$. LOL

HK$, M$ do well against US$

S can fall 30% more?

From NYT’s Dealbook

China’s decision to push the value of its currency lower has opened a new front of worry for global investors: a potential wave of currency devaluations among the so-called Asian tigers — South Korea, Singapore and Taiwan.

Such an outcome, a number of foreign exchange specialists say, would put a further damper on global growth expectations, which already are being revised downward as China’s once-booming economy retrenches.

The dollar’s strong run recently — together with the plunge in the price of oil and other commodities — has damaged fragile emerging-market economies like Brazil, Turkey and South Africa; the dollar has risen 130 percent against the Brazilian real and the South African rand since mid-2011.

The currencies of fast-growing Asian countries, including India, have largely been insulated, thanks to their better-performing economies and their ability to stockpile large foreign currency reserve positions.

… countries have some of the most overvalued exchange rates on the planet,” said Julian Brigden of Macro Intelligence 2 Partners, an independent research firm based in Vail, Colo., that advises large money management firms on global investment themes.

When economies have high exchange rates, their exports tend to lose market share compared with countries with cheaper currencies. And when that happens, countries that depend on foreign trade will frequently take steps to push their currencies lower.

…

But having a strong currency at a time when manufacturing competitors like Japan and China have weaker currencies leads to a sharp fall in exports, which have been the economic lifeblood of these countries for decades.

…

Already, global money managers have begun to pull money out of some of these Asian markets.

The Korean won and the Singapore dollar are down 5 percent, while the Taiwan dollar has lost 7 percent over the last six months. Even in India, perhaps the most popular emerging market among global investors, the currency has given ground, about 7 percent, against the United States dollar.

..

“I expect these currencies to fall by another 20 or 30 percent,” said Raoul Pal, an independent financial analyst and the founder of Real Vision TV, a media venture where sophisticated investors discuss their views on the market. “These export figures are a big deal — it’s a huge shrinkage in the dollar-based economy, as not enough people are buying goods.”

For quite some time, Mr. Pal has been promoting an investment thesis that the relentless rise of the dollar — since mid-2011, the dollar is up 35 percent against a broad basket of currencies — will have a deflationary effect on the global economy as export-driven economies enter into a series of competitive devaluations to protect crucial export sectors.

“This is not just a commodity story,” he said. “It’s a global trade story.”

Exchange-rate volatility in this part of the world will not take the heat off other weak currencies. In addition to usual examples like Turkey, Brazil and South Africa, investors expect commodity exporters like Indonesia, Chile and Colombia to take a big hit, as the prices for their products continue to fall.

The final frontier in this respect would be the pegged currencies in the Middle East, especially the Saudi Arabian riyal, which is tightly linked to the dollar.

…

The other problem with downward trending currencies in South Korea, Taiwan and Singapore is that these countries, like just about all emerging market economies, have taken advantage of a rock-bottom interest rate environment to issue billions of dollars in dollar-denominated corporate debt to finance capital investments.

Foreign investors were attracted to the high yields and especially the stable currencies and bought them in huge quantities. Now, with the currencies starting to wobble, dollar-based investors have less incentive to hold on to them, and they will do what they have been doing with their Brazilian, Turkish and South African bonds — get rid of them as quickly as possible.

“There is a lot of underlying investor exposure in these markets,” said Mr. Brigden, the independent research analyst. “I think if things continue to get worse, we are going to move to liquidation stage.”

A NEW GLOBAL CURRENCY WAR?/ “Good” news for some

But the good news for those of us who own Reits and good paying yield stocks is that the Fed may not raises rates in September. Good for those mortgaged to their eyeballs too. But TRE ranters will be upset that the coming collapse S’pore property prices will be again delayed once more. They want their fellow S’poreans to die for supporting the PAP. Ah well hope springs eternal.

China held firm on the value of its money for years, as other countries tried to secure an economic advantage by letting the value of their currencies slide on international markets. Some analysts see its jump into the fray as a new phase in a long-raging global currency war, Peter Eavis writes in DealBook. The plunge paused on Friday, but the renminbi was still down 4.4 percent against the dollar this week, a huge drop for China and the steepest drop since the country’s modern exchange system was set up, Neil Gough reports in The New York Times. The move could leave the United States exposed and undermine efforts to pull the world economy out of the doldrums.

The yen, the euro and several other major currencies have fallen in recent years against the dollar as the Federal Reserve has cut back its stimulus, but the countries that don’t join the devaluations can end up suffering if they export less and import more. A steep drop in the value of the renminbi could also intensify some of the forces that have caused the American economy to underperform.

Analysts also fear the currency tensions could worsen entrenched problems in the global economy, like its reliance on the dollar as a so-called reserve currency. This dependence means that the Fed’s actions can change economic conditions in other countries, and not always for the better.

The Fed now faces a problem. It is considering raising interest ratesfor the first time in more than nine years. A rate increase could drive the dollar up even more aainst other currencies, creating an obstacle to the American economy. It could also make life even harder for countries in the developing world, which could experience capital outflows. Companies in emerging markets that borrowed in dollars would have to spend more of their local currency to pay back their debts.

China, too, would struggle if there was an uncontrolled plunge in the renminbi. Chinese entities have borrowed more than $1.6 trillion in foreign currencies. “A sharp devaluation is not in China’s interest,” said Li-Gang Liu, a China economist at ANZ Research. “That could make corporates very panicky.”

Prolonged turbulence and economic pain may then force world leaders to think hard about whether the international system can be changed, Mr. Eavis writes. The easy money pumped out by the Fed over the last decade helped stoke booms in other countries that became unsustainable. As the Fed has pulled back, the adjustment has been jarring for huge economies, like Brazil and China.

“The system is coming back to bite us in the rear,” said David Beckworth, an associate economics professor at Western Kentucky University. “Maybe this experience teaches us that we are more interconnected than we ever were.”

NYT Dealbook

Holiday in M’sia, Indonesia

Against US dollar.

Malaysia’s ringgit and Indonesia’s rupiah both slid to 17-year lows, after falls of 2 per cent and 1.4 per cent respectively, while the currencies of India, Colombia, Taiwan, Chile, Vietnam, Turkey, Mexico, Brazil and Singapore all ended the week 1-2 per cent softer. FT

But these currencies depreciate against S$ too.

Everyone’s weaker against US$ after yesterday’s RMB devaluation

US$: Huat Ah

EURO FALLS LOWER Down the euro goes. On Friday, Mario Draghi, the president of the European Central Bank, said in an interview with a German newspaper that the threat of deflation might force his bank to take more aggressive stimulus measures, which could include buying eurozone bonds in bulk, Landon Thomas Jr. and Jack Ewing report in DealBook. His comments prompted the euro to fall to $1.20, a four-and-a-half year low against the dollar.

The dollar also hit a multiyear high against the Japanese yen, and it was also gaining on the fragile currencies in Brazil, Turkey and Russia.

What does it all mean? The moves highlighted a new trend in world currency markets: Global central banks ‒ along with investors also wary of the low returns that their euros have been delivering ‒ have increasingly been switching into dollars and out of euros, Mr. Thomas and Mr. Ewing write. “The expectation is that a rapidly recovering United States economy will push the Federal Reserve to increase interest rates this year, making dollar-based assets more attractive than those denominated in euros, Japanese yen and emerging market currencies,” they write.

The weakness in the euro on Friday came after Mr. Draghi, in an interview in Handelsblatt of Germany, said, “The risks of not fulfilling our mandate of price stability are in any case higher than they were six months ago.” Investors interpreted Mr. Draghi’s comments to mean that the central bank was moving closer to broad-based purchases of government bonds, possibly as soon as its next monetary policy meeting, on Jan. 22.

A worrying combination

A strong oil price and a strengthening US$.

Article

Winners and Losers as the US Dollar Falls

Great US-centric schematic on above.

Useful for followers of local mkt.