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Dollar up sharply as financial stress kicks back in

(ATF) – Donald Trump’s intervention in oil markets Thursday saw oil prices rise sharply and some of the momentum was transferred to stocks.

Oil is higher again today in Asia, trading at $26.40 at 8pm HK time, up 4.3%. But unhappily, the momentum transfer to equities has ceased. The FTSE is down more than 1%; so are US equity futures. 

The dollar, reflecting the stress, trades at 100.7610 on the DXY, up 0.58% at 8pm HK.

What markets are telling us is that – compared with the coronavirus impact – oil is a sideshow, put on by Putin and Mohammed Bin Salman, but has little to do with the core concerts on how long corona will last and how deeply it will cut. Oil price manipulation is, if anything, a hindrance to real price discovery based on oil demand.

So, believe the dollar, question oil. 

The Chinese currency didn’t play along with the oil game. Though the People’s Bank of China set parity weaker (at 7.1104) than at any time since October lows, the yuan quickly rose to 7.09 in the morning and has barely budged since. CNY stood at 7.0925 at 8pm.

Such stability will reassure foreign investors in local Chinese bonds who – after yesterday’s significant yuan weakening – might be forgiven for shying away as hedging costs rose sharply.


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