External Affairs Minister S Jaishankar dismissed speculation of India seeking to undermine the US dollar, emphasizing India’s robust trade relationship with the US despite President-elect Trump’s past threats of 100% tariffs on BRICS nations. He highlighted the strong Modi-Trump relationship and clarified India’s stance on BRICS financial discussions.
European equities surged on Thursday, fueled by lower-than-expected German inflation, sparking optimism for further ECB rate cuts. The dollar rebounded, while the yen weakened after a previous rally. Commodities showed mixed results, and cryptocurrencies experienced a pullback after recent gains.
Global markets experienced turbulence on Wednesday as a sharp decline in the dollar-yen pair, driven by speculation of a Bank of Japan interest rate hike, triggered a wave of risk-off sentiment. US equities suffered significant losses, particularly in the tech sector, while Treasury yields fell. The unexpected market shift occurred despite positive economic data and ongoing expectations of a Fed rate cut.
Asian markets experienced a downturn on Wednesday, driven by concerns surrounding the potential economic implications of Donald Trump’s presidency. Fears of a trade war with China, coupled with expectations of increased inflation due to tax cuts and import tariffs, have sent ripples through the region. The dollar has strengthened on the back of these anxieties, while Bitcoin continues to hover near record highs.
The US dollar’s recent decline against the Japanese yen has sparked concerns about a potential unwinding of the yen-carry trade, a strategy that involves borrowing yen at low interest rates to invest in higher-yielding assets. This could lead to significant pressure on long-term US Treasuries and risk assets, potentially echoing the global market crash of August 2024.
Donald Trump, the Republican presidential nominee, has threatened to impose a 100% tariff on goods from countries that abandon the US dollar as their primary trading currency. This move is part of Trump’s protectionist trade policies and aims to maintain the dollar’s global dominance. While the dollar’s dominance has weakened in recent decades, it still accounts for a significant portion of official foreign-exchange reserves. The announcement comes as Trump faces a close race against Democratic rival Kamala Harris, who is currently leading in Wisconsin, a crucial swing state.
Despite growing calls for de-dollarization, JPMorgan’s Joyce Chang argues that the US dollar’s dominance remains strong, supported by robust financial systems. However, she highlights emerging trends like diversification in commodity markets and the rise of digital payment systems as potential threats to the dollar’s long-term hegemony.
Economist Peter Schiff has expressed concern about an impending recession coupled with rising inflation, citing recent economic data showing contractions in manufacturing and construction activities. He believes that a weakening dollar, fueled by anticipated interest rate cuts, could lead to increased import prices and exacerbate inflationary pressures. While some argue that the current economic indicators are lagging and might not accurately reflect the near-term economic trajectory, Schiff’s warning highlights the potential for a challenging economic environment.
The US economy continues to show strength with a revised second-quarter GDP growth of 3%, fueled by robust consumer spending and improving corporate profits. This positive news boosted the US dollar and tech stocks while tempering expectations for interest rate cuts.
Renowned economist Peter Schiff has expressed concerns that the weakening dollar, ahead of anticipated Federal Reserve rate cuts, could rekindle inflationary pressures. The dollar’s decline against the Swiss franc, reaching a 13-year low, further emphasizes Schiff’s belief that the Fed’s planned rate cut is a misstep, as a weaker currency can drive up import prices and subsequently consumer costs.
