USD Graphic Rewind 05.25
USD INDEX GRAPHIC REWIND
A familiar theme was visible yesterday in the dollar index (DXY), safe haven plays. As equity markets wobbled amid resurgent concerns surrounding the EMU’s banking system, after the Bank of Spain took over a regional bank to save it from failure. A move that impacted the whole banking system and raised questions regarding contagion risks from the Greek debt crisis. The euro was once again under pressure as investors shunned the single-currency, market chatter indicated real-money accounts were diversifying out of the euro. As a result the dollar was well bid throughout the day and has accelerated its gains into Asian trade as Korean tensions look to be reaching the boiling-point. News outlets have widely reported the North Korean army was told to prepare for battle. Asian equities and currencies have been clobbered as a result and investors were given further reasoning to shed riskier assets and buy dollars.
Looking ahead, the EMU is likely to dominate trade again today, if equities can reverse their Asian counterparts losses we may see the index give up a portion of its over-night gains. Even if this does occur we expect the dollar index to maintain an underlying bid tone since the global recovery seems anything but sure footed and investors will continue to hold dollars until proven otherwise.
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