By Geoffrey Smith
Investing.com — The dollar has drifted higher relative to its counterparts in the developed markets, but relinquished its gains against emerging currencies in the early European trade on Friday, as the market has digested the promise of the federal Reserve to inject us $ 1.5 trillion of reserves into the financial system Thursday.
The Fed has also announced that its injection of reserves that has already been programmed through purchases of Treasury bills would now place on the whole of the yield curve of the Treasury, in an effort to mitigate the liquidity problems emerging in the risk-free asset of reference in the world. Analysts have described this movement as the beginning of “QE4” – a new round of quantitative easing as the president, Donald Trump has already called for.
Has 10.55, the dollar index, which measures the greenback against a basket of currencies, was essentially stable at 97,45. It rose 1.3% against the japanese yen to 105,95 and remained unchanged against the swiss franc, safe-haven currency, but declined slightly compared to the euro and the pound sterling.
Markets had been shaken on Thursday by the reluctance of the european central Bank to reduce interest rates and by the comment incendiary to the president Christine Lagarde, according to which “we are not here to close the gap”, a remark which has led to strong sales of obligations of the Italian State. The ECB has subsequently backtracked, but the yield spread German-Italian remained at high levels : at 10.55 am, he was always on 247 basis points.
“It is worth to clarify it,” said Claus Vistesen, an economist for the euro zone within Pantheon Macroeconomics. “Italy is in the throes of an economic crisis and public health on an unprecedented scale, and the ECB recently suggesting that she does not care what the markets are interested in the market of the CONSTRUCTION industry as a result”.
After having ignored the stimulus measures of the ECB, the Bank of England and the federal Reserve, the markets are desperately seeking a sign that the epidemic of coronavirus is at its peak. There is still no sign of this kind, either in Europe or in the United States.
Previously, the central banks of Norway and Sweden have all announced emergency measures to support local financial markets, Norges Bank has reduced its policy rate by 50 basis points and the Riksbank has injected 500 billion crowns cash.
The Norwegian krone rose 0.4% against the euro after this measure, while the pair EUR/SEK declined by 0.2% to 9,7181. The euro was up 3.6% compared to the Swedish crown and of 7.8% compared with the currency Norwegian this week, most of its crosses have increased as a result of the unwinding of carry trades funded in euros. The Norwegian krone has been particularly low because of the collapse in oil prices.
There has also been a relief to emerging currencies affected by the flight to quality early in the week. The dollar has fallen 2.8% against the ruble after having reached its highest level in four years during the night, while he has also fallen by 1.8% compared to the south african rand and 0.6% relative to the Turkish lira.