USD INDEX GRAPHIC REWIND
The dollar index
(DXY) had a difficult day yesterday as it struggled with multiple factors to establish direction. On a day when a massive liquidation took place in global equity markets one would expect the index to have climbed sharply as investors bought safe haven assets. However, this was not the case, as the above graph shows the dollar index was under intense pressure throughout the day. The graph shows intervention was the theme of the day and seems to explain away our correlation problems and why the Usd would be under such pressure despite sliding stock prices. Market chatter indicated that the SNB once again were intervening in the Eur/Chf
cross, which bolstered the euro
early. While there are no clear indications that the ECB was on the bid it was widely suspected and the euro’s sharp gains looks like a smoking gun. The intervention didn’t end there, the Aussie
dollar experienced a sharp rebound also flying in the face of a sinking Nikkei
– to which it is closely correlated – and gold
, the RBA has spoken in the past of intervention and are suspected to have been supporting the antipodean.
The US dollar did lose some of its appeal with the much weaker than expected weekly jobless claims indicating that the labour market in the United States is far from recovered. Players had been betting on the Fed raising rates in the medium-term and the subsequent narrowing of yield differentials, however, interest rate hikes are based on the economy and strong underlying fundamentals, this recent data undermines this hope.
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