Currencies

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  • The renminbi joins the SDR club.

    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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  • The dollar index sold off on the poor service ISM news.

    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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  • Australia's dollar is testing a three year downtrend.

    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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  • Currency market participants love talking about the JPY100.00 level.

    Forex Participants Watch the JPY100.00 Level

    This Great Graphic was created on Bloomberg.  I use it to illustrate a possible head and shoulder pattern that has been carved by the US dollar against the yen.  Head and shoulders patterns are most often regarded as a reversal pattern.

    Some purists may insist this is always the case, yet many technicians recognize that on a rare occasion, the head and shoulders pattern can point to the continuation of the existing move.

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  • The current floating exchange rates are still preferable to fixed.

    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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