Currency

The Dollar Doldrums

 

A sharp decline in the relative value of the dollar this year has been met with cheers from those hoping for a short-term boost to the US economy, and with hand-wringing by those worried about the currency’s global standing. But while both views reflect underlying truths, neither tells the whole story.

Several factors have combined to put downward pressure on the greenback (as measured by the DXY index of trade-weighted currencies) in recent weeks, resulting in a depreciation that has reversed almost half of the appreciation of the last ten years within the space of just months.

As the US Federal Reserve has loosened monetary policy (actually and prospectively) in response to a worsening economic outlook, the income accruing to dollar-denominated safe havens, such as US government bonds, has declined. And with US-based investments having lost some of their relative attractiveness, there has been a shift in holdings in favor of emerging markets and Europe (where the European Union last month agreed to pursue deeper fiscal integration).  Read More

 

Bitcoin Market ‘Much Different Now’ as New BTC Wallets Approach 2017 Highs

New on-chain data suggests that demand for Bitcoin (BTC) from new investors is growing. Specifically, the number of new BTC addresses is nearing 2017 levels when the price hit $20,000.

Brock Connelly, the CEO of RoundBlock Capital, said:

“Has anyone noticed, daily active addresses (Bitcoin) is back above June 2019 levels, and approaching high of 1.29mm in December 2017. BTC market feels much different now.”

Various on-chain metrics hint at a continuation of the Bitcoin uptrend, despite the digital asset’s 28% increase in the past three weeks.

Buyers show renewed interest as new BTC addresses rise

After the Aug. 2 Bitcoin flash crash, both BTC and Ether (ETH) have steadily increased in price. At the time, more than $1 billion worth of futures liquidations in one hour sent the market plunging for a brief period of time.

Since then, major cryptocurrencies have stabilized, seeing less volatile price movements. The stability of BTC and ETH could also indicate the start of an accumulation phase.

While this week’s BTC price action has been strong, the digital asset has many technical reasons to see a rejection from the $11,700 to $12,000 range. Historically, $12,000 has served as a strong resistance level and every attempt to close a weekly candle above it in the last two years led to prolonged corrections.

With that said, the price of Bitcoin is steadily increasing as metrics like new BTC addresses continue to rise. The data suggests that many investors appear to be gradually accumulating BTC…CLICK for complete article

End of the US Dollar as Reserve Currency

Trust is a fickle thing. It’s there until it isn’t. This is especially true with paper currencies. Their value is based on trust that the sovereign issuer will act faithfully and responsibly. The standards for a reserve currency are even higher given their status in global trade and finance. Throughout history, there have been many reserve currencies and they have all failed, eventually. Every one.

The average shelf life of a reserve currency is approximately 100 years. Can anyone today recall the importance of the French Livre or the Dutch Guider in world trade? They were the “U.S. dollar” of their day. At their height, no one questioned their durability much the same as, until recently, most didn’t question the durability of the U.S. dollar. But for a few keen observers, the writing has been on the wall for several decades.

It first caught my attention in the late 1990s. I started to see a change in behaviour by the Federal Reserve under Alan Greenspan. He was coming to the rescue of markets under the guise of protecting the financial system with increasing frequency. First it was the bail out caused by the demise of the hedge fund Long Term Capital Management in 1998. During this same period, Greenspan — with the assistance of the media — helped fuel the dot com bubble which finally burst in 2000. By the time the 9/11 terrorist attacks occurred in September 2001, the Fed, under Greenspan, began its policy of keeping interest rates “accommodative“ permanently and also showing blatant disregard of its independence from federal government policy.   Full Article

Better Stay Shush About That One Then….

 

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

Wherever there are banks – there is pain.

There is much to be learnt from bank results and comments in recent days. Yesterday the three US banks, Citi, JPM and Wells put $28 bln in the provisions pot to cover looming losses as the Covid-Recession bites through the second half of the year. The US banks aren’t particularly bothered – what Citi and JPM lost on the swings on loan provisions, they made up on the roundabouts of bond trading – more on that

 

It’s a textbook beginning to a foreseeable end

Trust is a fickle thing. It’s there until it isn’t. This is especially true with paper currencies. Their value is based on trust that the sovereign issuer will act faithfully and responsibly. The standards for a reserve currency are even higher given their status in global trade and finance. Throughout history, there have been many reserve currencies and they have all failed, eventually. Every one.

The average shelf life of a reserve currency is approximately 100 years. Can anyone today recall the importance of the French Livre or the Dutch Guider in world trade? They were the “U.S. dollar” of their day. At their height, no one questioned their durability much the same as, until recently, most didn’t question the durability of the U.S. dollar. But for a few keen observers, the writing has been on the wall for several decades.

It first caught my attention in the late 1990s. I started to see a change in behaviour by the Federal Reserve under Alan Greenspan. He was coming to the rescue of markets under the guise of protecting the financial system with increasing frequency. First it was the bail out caused by the demise of the hedge fund Long Term Capital Management in 1998. During this same period, Greenspan — with the assistance of the media — helped fuel the dot com bubble which finally burst in 2000. By the time the 9/11 terrorist attacks occurred in September 2001, the Fed, under Greenspan, began its policy of keeping interest rates “accommodative“ permanently and also showing blatant disregard of its independence from federal government policy.   Full Article

 

The dollar is going to fall very, very sharply

Stephen Roach, Yale University senior fellow and former Morgan Stanley Asia chairman, has a warning for U.S. dollar bulls. The prominent economist says that the era of the U.S. buck may be coming to an end and is forecasting a 35% decline soon in the U.S. currency against its major rivals, citing increases in the nation’s deficit and dwindling savings.

The lecturer said during CNBC’s “Trading Nation” on Monday that the rise of China and the decoupling of the U.S. from its trade partners is setting the stage for a dramatic weakening of the U.S. currency in the next few years that is likely to end the supremacy of the monetary unit as the world’s reserve currency.

“The dollar is going to fall very, very sharply,” he told the business network.

Roach’s comments follow similarly themed op-ed that he wrote in Bloomberg last week, in which he specifically declared that the “era of the U.S. dollar’s ‘exorbitant privilege’ as the world’s primary reserve currency is coming to an end.

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