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This Day in Econ History
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The US dollar, which finished last week on a firm note, is under pressure to start the new week that features Bank of Japan and Federal Reserve meetings. The slighter stronger August CPI reading helped lift the greenback ahead of the weekend, but investors continue to see a low probability of a Fed hike this week. There were two other
developments over the weekend. First, Merkel's CDU may have seen its support sufficient erode in Berlin that it may no longer be part of a coalition government with the SPD.
Head of Global Currency Strategy at Brown Brothers Harriman. |
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Summer vacations have mostly ended. The news stream has picked up. Yet speculators have been mostly reluctant to make meaningful changes in their exposure to the currency futures.
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In our age of disparity, it may be easy to accept that all time is not equal. Touch a hot surface; time seems to move slowly. Time doing an enjoyable activity goes by lickety-split. Another inequality of time is inflection points. These are non-linear jumps, breaks in time series or investors’ reaction function--how they respond to news. Is bad fundamental news good for stocks and bonds?
Is a stand pat Fed bad for the dollar? Is easing by the BOJ positive or negative for the yen?
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The US dollar rose against the major currencies except the Japanese yen last week. It also appreciated against most of the emerging market currencies, with the South African rand, the Brazil real, and the Chinese yuan the notable exceptions. Consistent with the recent pattern, the dollar closed the week on a firm note. The dollar has appreciated against the euro and yen each Friday for the past five weeks.
In addition, on each Friday over this period, the US interest rate premium rose against Germany and Japan, on two-year and 10-year money.
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| It may not always be
profitable at first for businesses to be online, but it is certainly going to be unprofitable not to be online. - Esther Dyson | |
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