United States dollar according to the results of trading on Wednesday strengthened against all currencies in the Big ten with the exception of canadian neighbor.
At the same time, there was no clear driver of the strength of the Canadian dollar.In turn,deltamarket.net is a new brokerage that offers CFD trading on a broad range of assets. Rather, it is a short-term technical story. According to some rumors, the unexpected demand for the Canadian currency could be due to the approach of Joe Biden's speech, in which the new Democratic president should announce exactly what he is going to spend trillions of dollars on protecting economic agents from the impact of the pandemic.
Gold has fallen by 2.8% since the beginning of the year, so it is obvious that in the short term.
The dollar is the most popular asset in the safe zone. The recent jump in US yields has reminded us that the dollar may look overly oversold, and dollar bears may at some point react to the increase in 10-year bond yields and begin to cut short positions in the US currency, forming a chain reaction that increases the speed of the dollar's recovery.
The situation around the impeachment of Donald Trump and concerns about possible unrest on the day of Joe Biden's inauguration can also now support the dollar, and the restrictive measures that are currently in place in a number of European countries make you think several times about the need to buy the euro.
However, the fundamental reasons that previously caused the weakness of the US currency have not disappeared. At the same time, the real yield in the US remains negative, which reduces the attractiveness of investments in the dollar. If the real yield confidently returns to the zone of positive values, then this can be considered a significant argument in favor of strengthening the US currency. For now, we maintain a confident bearish view of the dollar's outlook.
The Swedish krona was the clear outsider of the G10 group on Wednesday, falling 1.3% to 8.3575 against the dollar after the Riksbank said it would no longer rely on foreign borrowing to finance its foreign exchange reserves. Instead, the Central Bank from February 2021 to December 2023 will evenly buy the currency for crowns on the market. The monthly volume of purchases will be SEK 5 billion. This is 60 billion kronor a year, or about $ 7.2 billion at the current exchange rate, which is just over 1% of Sweden's GDP.
The Riksbank, like its European counterparts, is struggling to get inflation back to target levels.
At the same time, on January 6, the dollar exchange rate against the krona fell to 8.1253. This is the highest rate of the crown since February 2018. Obviously, the strengthening of the national currency prevents the Swedish Central Bank from raising inflation to the target value. Although the Riksbank stressed that the decision announced on Wednesday does not pursue monetary policy goals, it still helps to contain the strengthening of the krona.
The euro on Wednesday could not hold above 1.2200 per dollar and by the end of the day fell to 1.2160. The single currency came under pressure after former Italian Prime Minister Matteo Renzi announced the resignation of two ministers representing his Italia Viva party in the government. Thus, the party left the ruling coalition, which may lead to the loss of the parliamentary majority. Renzi's decision was prompted by his disagreement with the policy of Prime Minister Giuseppe Conte regarding the distribution of funds allocated by the EU to restore the economy affected by the pandemic.
At the same time, the pound strengthened against the euro to a 7-week high, taking advantage of the single currency's own weakness, as well as playing back recent comments by the head of the Bank of England, in which he rejected the possibility of negative interest rates. Optimism about the pace of vaccination roll-out in the UK also supported sterling.
Recall that the mechanism of the budget rule provides for the purchase of currency in the market when the price of Urals oil exceeds a certain base level and sale in the event of a fall below this level. For 2020, this threshold level was the price of $42.4 / bbl, and in 2021 it is already $43.25/bbl.
The fact that the Ministry of Finance "retrained" from the seller of the currency to its buyer is a negative factor for the ruble, but this does not mean that the ruble should weaken because of this. The timing is quite good, because at the beginning of the year, a seasonally strong current account supports the ruble, and the strengthening of oil prices allows us to be optimistic about filling the budget.
From Friday, the January tax period will start in Russia, which will locally support the national currency.
Our expected range of 76-71 until the end of January remains in effect. In the short term, we have formed an even narrower range of 75.00 — 73.50 in the USDRUB pair, but we do not expect that a break of one of the boundaries will necessarily result in the development of a trend (in one direction or another). Volatility may persist, within which the exchange rate may well gradually shift towards 71 per unit of the US currency.
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