NEWS / Trade Policy

Liquidity boost for dollar

Liquidity boost for dollar

The Euro was unable to push back above 1.2730 against the dollar on Thursday and weakened to test support at 1.2665 in New York. The Euro pushed back to 1.2685, but was still vulnerable to corrective pressures and dipped to 1.2650 in early Europe on Friday.

Emerging-market and high yield currencies were subjected to further stresses during Thursday on a combination of rising geo-political tensions and higher oil prices. There is the potential for a flow of funds back to the US currency as positions funded through the dollar are cut. There will also be the potential for a buying of US Treasuries on safe-haven grounds which will offer near-term dollar support. The longer-term implications will remain less benign for the US currency, especially if Wall Street continues to weaken.