The Dollar strengthened for the time being; the Turkish lira continues to slide

By Peter Nurse

The dollar has pushed higher early in the day on Friday, resuming its role as a safe haven in a context of tensions renewed between the United States and China, but the gains are likely to be capped by the impasse in the us Congress over the last recovery plan prior to the publication of the monthly report of official employment.

A 11: 40 am, the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.4% (93,183, not far from the lowest level in two years reached Thursday to 92,483.

USD/JPY gained 0.1% us $ 105.67, GBP/USD fell 0.4% to 1,3089 and EUR/USD fell 0.5% to 1,1812, despite industrial production with German and French both of which have far exceeded expectations for the month of June. German exports have also increased 12.7% compared to the month of June. The data all indicate that a rebound is considerable activity at the end of the second quarter.

USD/CNY rose 0.2% to 6,9637.

The us president, Donald Trump has revived tensions already high with Beijing, and has fueled some demand for the dollar, announcing late Thursday that his administration prohibited transactions american with two applications of the chinese popular, WeChat of Tencent, and TikTok of ByteDance.

The tension between the two powers, smoldering for months, the United States being unhappy with the way in which China managed the outbreak of coronavirus and steps taken to restrict the liberties in Hong Kong.

That said, these gains seem to be temporary as the sentiment has turned against the greenback due to a combination of the increase in infections with the coronavirus in the United States, a steady decline of the yields of the Treasury and, more immediately, a lack of consensus in Washington on fiscal stimulus and additional.

“The demand for dollars, both on the part of investors that the business community is in decline and the dollar is no longer the only game in town,” said the analyst ING (AS:INGA) Chris Turner, in a research note.

The republicans and the us democrats are not reached until now an agreement on the size and the composition of a new fiscal stimulus plan that many believe is necessary to prevent the u.s. economy from losing even more speed.

The data on unemployment claims released Thursday show that more than 31 million Americans are demanding services, and the publication of data on non-farm payrolls later on Friday expected to show that job creation in the United States slowed in July, with a projected increase of 1.6 million jobs for the month, a sharp slowdown from the previous record of 4.8 million in June.

An area where the dollar has shown some strength lately is against the Turkish lira, with an increase of 0.9% to a new record of 7,3036. The lira has fallen almost 20% against the dollar since the beginning of the year, despite the problems of the greenback.

The Turkish central bank has made an interest rate decrease of 1 575 basis points in nine consecutive stages from July 2019, in order to stimulate growth while reducing the cost of borrowing adjusted for inflation below zero.

The currency being hit, Goldman Sachs (NYSE:GS) now provides for 175 points increase by the end of the year, considering that the Turkish central bank has spent $ 65 billion during the first six months of the year to manage its currency.


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