Dollar Recovers After Initial Weakness

Trading 21 mar 2020 Commentaire »

The U.S. dollar retreated early on in the session on Friday, giving up some of its recent gains, but regained most of the lost ground as the day progressed and was trading flat by late afternoon.

Global central banks have announced massive release packages and interest rate cuts over the last few days, aiming to limit the economic impact of the coronavirus pandemic.

The US Federal Reserve today announced a coordinated action with other five leading central banks to further boost the US dollar liquidity through swap facilities as the spread of the coronavirus, or Covid-19, pandemic and the consequent economic shock, triggered recession fears that are rattling markets.

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank are part of this move.

The six central banks agreed to increase the frequency of 7-day maturity operations from weekly to daily to improve the US dollar liquidity swap lines' effectiveness.

These daily operations will commence on Monday, March 23 and will continue at least through the end of April, the banks said in a joint statement. The central banks also will continue to conduct the weekly 84-day maturity operations.

The European Central Bank's supervisory arm came out with relief measures for euro area banks on Friday, giving further flexibility in prudential treatment of loans backed by public support measures.

The Bank of England has decided to cancel the 2020 annual stress test for the eight major UK banks and building societies, with an aim to help lenders focus on meeting the credit needs of households and businesses at this hour of crisis.

The dollar index moved in a broad range between 101.09 (in the Asian session) and 102.99 today. When last seen, it was at 102.72, down slightly from previous close of 102.76.

Against the euro, the dollar was up more than 0.2% at $1.0669, after having weakened to $1.0832 earlier.

Against pound sterling, the greenback slipped to $1.1567, losing about 0.7%.

The yen weakened to 111.32 a dollar, after having settled at 110.71 on Thursday.

The dollar was weak against the Aussie and the loonie. Against the former, it was down more than 0.6% with the Aussie-Dollar pair at 0.5780, and against the latter, it was down 0.75%, at 1.4402.

The Swiss franc extended recent losses against the dollar. At $0.9886, the dollar was up by a little over 0.25%.


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Crude Oil Futures Tank, Settle 11% Lower

Trading 21 mar 2020 Commentaire »

Crude oil prices tanked on Friday despite several countries and central banks announcing relief packages to help limit the economic impact of the coronovirus pandemic.

Additionally, the U.S. President Donald Trump hinted about stepping in to halt the price war between Russia and Saudi Arabia, the two nations.

Russia and Saudi Arabia have started a price war following the recently concluded OPEC+ meeting failing to agree on deepening crude output reductions.

West Texas Intermediate Crude oil futures for April ended down $2.69, or about 11%, at $22.53 a barrel on expiration day.

WTI Crude oil futures later sank deeper to $19.46, losing more than 22%.

Brent crude futures were down $1.25, or about 4.4%, at $27.22 a barrel a little while ago.

On Thursday, WTI crude oil futures for April ended at $25.22, up $4.85, or about 23.8%, the biggest single-session gain ever in percentage terms.

At a White House news conference on Thursday, Trump indicated he could intervene in the price war between Saudi Arabia and Russia at the appropriate time, and that he was searching for "medium ground" to break the deadlock as low prices were hurting the domestic oil industry.

A Texas Railroad Commissioner proposed joining the two countries in cutting 10% of crude output to stabilize the market.

According to the Wall Street Journal, the Trump administration is mulling more direct intervention to bring Moscow and Riyadh back to the table, under pressure from American oil companies to do so amid the lowest U.S. oil prices in 18 years.


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Gold Prices End Higher For 2nd Straight Day

Trading 21 mar 2020 Commentaire »

Gold prices ended higher on Friday, extending gains to a second straight session, after suffering some severe setbacks earlier in the week.

Positive reaction to the relief and support packages announced by central banks and several governments across the globe prompted traders to pick up the safe-haven asset for a second successive day.

However, the safe-haven asset's gains in the end was substantially lower than what they were early on in the session.

The dollar index, which began the day on a weak note, recovered some lost ground and was trading at 102.56 about an hour past noon, trailing its previous close by 0.18%.

Gold futures for April ended up $5.30, or about 0.4%, at $1,484.60 an ounce, after scaling a high of $1,519.40 and a low of $1,457.50 an ounce.

Gold futures lost about 2.1% in the week, posting their second straight weekly loss.

Silver futures for May ended higher by $0.251 at $12.385 an ounce today, while Copper futures for May settled at $2.1715 per pound, down $0.0140 from previous close.

The Federal Reserve said today that it will establish temporary swap lines with other nine central banks as part of coordinated action to improve liquidity in the financial markets.

In a joint statement, the Fed said it will extend U.S. dollar liquidity arrangements with the Reserve Bank of Australia, the Banco Central do Brasil, the Danmarks Nationalbank, the Bank of Korea, the Banco de Mexico, the Norges Bank, the Reserve Bank of New Zealand, the Monetary Authority of Singapore, and the Sveriges Riksbank.

The Fed has standing US dollar swap lines with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank.

The swap facility will be in place for at least six months, the Fed said.


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Major Central Banks Take Further Steps To Boost Liquidity Amid Covid-19 Shock

Trading 21 mar 2020 Commentaire »

The US Federal Reserve on Friday announced a coordinated action with other five leading central banks to further boost the US dollar liquidity through swap facilities as the spread of the coronavirus, or Covid-19, pandemic and the consequent economic shock, triggered recession fears that are rattling markets. The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank are part of this move. The six central banks agreed to increase the frequency of 7-day maturity operations from weekly to daily to improve the US dollar liquidity swap lines' effectiveness. These daily operations will commence on Monday, March 23 and will continue at least through the end of April, the banks said in a joint statement. The central banks also will continue to conduct the weekly 84-day maturity operations.

The swap lines among these central banks are available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses, both domestically and abroad, the central banks said.

On Thursday, the Fed said it will extend U.S. dollar liquidity arrangements with the Reserve Bank of Australia, the Banco Central do Brasil, the Danmarks Nationalbank, the Bank of Korea, the Banco de Mexico, the Norges Bank, the Reserve Bank of New Zealand, the Monetary Authority of Singapore, and the Sveriges Riksbank.

These new facilities will support the provision of U.S. dollar liquidity in amounts up to $60 billion each for central banks of Australia, South Korea, Brazil, Mexico, Singapore and Sweden.

The swap lines with the Danmarks Nationalbank, the Norges Bank, and the Reserve Bank of New Zealand will amount up to $30 billion. Separately, the European Central Bank and Danmarks Nationalbank reactivated a swap line and increased the maximum amount to be borrowed by Danmarks Nationalbank from EUR 12 billion to EUR 24 billion. The facility will remain in place for as long as needed and was reactivated for Danmarks Nationalbank to provide euro liquidity to Danish financial institutions.

The ECB's supervisory arm also came out with relief measures for euro area banks on Friday. The central bank gave banks further flexibility in prudential treatment of loans backed by public support measures. The central bank urged banks to excessive procyclical effects when applying the IFRS 9 international accounting standard and activated capital and operational measures announced on March 12. The ECB said the capital relief for banks total EUR 120 billion that could be used to absorb losses or potentially finance up to EUR 1.8 trillion of lending for businesses and households that need support at the time of this pandemic. The Bank of England on Friday said it has decided to cancel the 2020 annual stress test for the eight major UK banks and building societies, among other measures. The move is intended to help lenders focus on meeting the credit needs of households and businesses at a time of crisis. Further, the bank said the Financial Policy Committee and the Prudential Regulation Committee expect that all elements of banks' capital and liquidity buffers can be drawn down as necessary to support the economy through this temporary shock. The central bank observed that the recent 2019 stress test showed that the UK banking system was resilient to deep simultaneous recessions in the UK and global economies that are more severe overall than the global financial crisis, combined with large falls in asset prices and a separate stress of misconduct costs.

Elsewhere in Europe, Sweden's central bank said it has decided to buy covered bonds. The Riksbank had earlier decided to extend its purchases of securities during the year by up to SEK 300 billion.

The purchases will if necessary include government and municipal bonds, covered bonds and securities issued by non-financial corporations, the bank said on Friday.

The Riksbank purchased nominal government bonds worth roughly SEK 2.5 billion on March 18. On March 25, the bank plans to purchase covered bonds issued in Swedish kronor by Swedish institutions to a nominal amount of SEK 10 billion.

"The Riksbank is following developments closely and stands prepared to take further measures and provide the liquidity that is needed," Governor Stefan Ingves said earlier on Friday, after the bank auctioned SEK 100 billion in 2-year loans to banks at the repo rate, which is now zero.

All indications suggest there is good liquidity in the Swedish banking system, the Riksbank chief said. "All of the Riksbank's tools can be put to use," Ingves added.

Norway's central bank lowered its key interest rate sharply by 75 basis points at an extraordinary meeting to 0.25 percent.

The Norges Bank had lowered the rate by 50 basis points on March 13. Policymakers did not rule out a further rate cut.


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