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Are You Ready for Renminbi?

On October 1, the Chinese renminbi officially joins becomes the fifth international reserve currency. Until recently, Washington played geopolitics to defer the renminbi’s internationalization. However, what about Wall Street? 

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CFTC: Long Position Liquidiation

Over the summer, the US dollar was out of favor with the speculators in the futures market. This means that gross long positions increased and gross short positions tended to fall.  Speculators are only short three of the eight currency futures we track, the euro, sterling and Mexican peso.

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The Dollar Bulls Hold Their Ground

It took the market a few days to overcome the shockingly poor non-manufacturing ISM (51.4 vs. 55.5). However, by the end of the week, the US dollar bulls had regained the upper end.  The September Fed funds was implying a yield of 41.75 bp, up a quarter of a basis point from the September 2 close.

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Having the Renminbi in the SDR Club

On 30 November 2015, the IMF announced that the Chinese renminbi (RMB) was to be included in its special drawing rights (SDR) currency basket. Joining the SDR — the IMF’s chief international reserve asset for member states — meant that the RMB had been deemed ‘freely usable’.

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Service ISM Hits a Six-Year Low, and the Dollar

The US dollar was already trading with a heavier bias before the shockingly poor service ISM.  The August non-manufacturing ISM tumbled to 51.4, a six-year low, from 55.5 in July.  Markit, which does its own survey, showed a smaller decline in its August read to 51.0 from 51.4 in July.  This was up slightly from the preliminary 50.9 estimate.

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All You Need to Know about FX Turnover

How much growth has foreign exchange experienced from the last report in April 2013?  Overall trading in foreign exchange has fallen from a year-to-year basis.  Markets in April 2016 saw turnover fall to $5.1 trillion from $5.4 trillion due primarily to less movement in the JPY in the current market environment.

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All Hail the New SDR Bond...or Not

The World Bank sold the equivalent of about $700 mln of a three-year of a multiple currency bond that duplicated the composition of the IMF's Special Drawing Right or SDR.  There has been much fanfare.  It is the first SDR bond in more than 30 years according to reports.

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CFTC: Oil and 10-Year Treasury Hot Spots

Summer doldrums continue to depress speculative activity in the currency futures market.  In the CFTC Commitment of Traders reporting week ending August 16 speculators made small adjustments to gross currency positions.  There was only one change more than 6k contracts.

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The Down Under Dollar is Making a Move

Since late July, I have been looking for the Australian dollar to turn lower.  Instead, the Aussie has continued to climb.  It has risen in ten of the past eleven weeks.  As this Great Graphic, created on Bloomberg, these gains have brought the Australian dollar toward a three-year downtrend line drawn off the April 2013 and the June-July highs from 2014.

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The Lure of a New Gold Standard

Today is anniversary of the final blow to the dollar-gold standard.  By August 15, 1971, the exchange of dollars for gold was limited to central banks, and US President Nixon unilaterally ended it.  There was a brief attempt to resurrect it with new parities that failed, and thus beginning the current era of floating exchange rates.

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Monetary Policy Frustration May Lead Investors to Gold

As non-traditional monetary policies in advanced economies are likely to eclipse, investors will increasingly turn to gold to hedge their portfolios.  Around mid-April, when the price of gold was still about $1,290, I made a contrarian projection that gold had a bright, though bumpy future. Since then, gold price has climbed to $1,365 – which translates to 6% in just one quarter.

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