- USD index now stands at 95.451
- Emerging market currencies main losers
- China suggests tariffs on $60bn of US imports
The USD strengthened further on Monday, following a trend that has now lasted for two weeks. Investors are clearly betting that the ongoing trade conflict and a robust US economy will continue to push the currency higher.
The US dollar index, a measure of the currency’s strength against a basket of other major currencies, ended 0.3% higher at 95.451 yesterday and is now approaching the one-year high of 95.652 recorded on 19 July.
A senior investment specialist at Russell Investments, Paul Eitelman, said: “The US economy is doing well and the Fed is moving towards a more predictable path of interest rates than earlier, which has prompted us to change our underweight positions on US debt to neutral in some portfolios.”
The USD has gained particularly against emerging market currencies, with investors betting that the growing trade war will affect their export-focused economies more than others.
Since the middle of April, the USD index has already strengthened by 6%, while an emerging market local currency bond ETF has suffered losses of more than 10% during the same period.
The USD strengthened against currencies such as the Turkish lira yesterday. The latter lost 0.6% of its value and ended at 5.12 to the USD, a record low.
The US issued an announcement just before the weekend saying that Turkey’s duty-free access to American markets was under review – a step that could impact close to $1.7bn of Turkish imports to the United States.
Chinese stocks, meanwhile, dropped by close to 2% as the country suggested tariffs on $60bn of US products before the weekend. At the same time, a high-ranking Chinese diplomat expressed doubts about the chances of successfully negotiating a solution with the US.
