Latest news with #KingDollar
Arabian Post
18-05-2025
- Business
- Arabian Post
Moody's credit downgrade is a macro game changer. What now?
Matein Khalid While I was not surprised by Moody's decision to cut the sovereign credit rating of the US from Aaa to Aa1 since I have done my best to warn my friends in this post about the King Dollar's vulnerable underbelly on debt/deficits, I am surprised that the credit rating agencies is willing to risk the wrath of Trump White House with this move. After all, Trump could well invoke the International Emergency Economic Powers Act to handcuff Moody's entire executive board for an enforced sojourn in Club Fed or even declare or shut down the credit rating agencies for this un-American act of lèse-majesté. However, nothing good will come out of this move for risk assets or the US dollar. US Treasury bond yield will rise, the S&P 500 will tank on Monday and the Republicans now a neo-Maoist personality cult for Tariff Man rather than a pragmatic, rational political party will go ballistic in their political outrage. The timing of this move is Godawful. The S&P 500 Index is up a stellar 20% since Trump did a U-turn on China tariff and the need to sack 'Mr. Loco/loser' Jay Powell from the Federal Reserve. It will also amplify the existing decline in both consumer and business confidence as well as increase credit/liquidity risk premia in the stressed FHA mortgage debt, auto loan, credit receivables, student debt, junk bond and asset backed securities market in an economy that must refinance $9.5 trillion by this winter. The Moody's move will also reinforce the embryonic megatrend towards a strategic asset allocation shift by global investors out of greenback assets, the dominant theme in post-Liberation Day financial markets for moi. See also My bearish King Dollar and black gold trades are money gushers! I did not need Moody's to enlighten me that something was dangerously wrong in a $28 trillion economy with $35 trillion in debt and almost $2 trillion in annual budget deficits that Uncle Sam, the world's monetary emperor, literally wore no clothes. The global sovereign debt market is full of miss priced credit and the US is only the tip of a very dodgy intercontinental iceberg where serious money can be made by the leveraged cognoscenti at the expense of the trusting, patriotic, my country right or wrong loony-tune lambs. Nicolo Machiavelli wrote – 'do not put your trust in the false promises of princes' after a lifetime navigating the murderous politics of Renaissance Florence. As a citizen of a Third World state under military diktat that just received a $1 billion IMF thank you gift from Trump last week for being part of a brilliant people, especially since I got 4-degrees from the same Penn/Wharton, I can only say thank you POTUS, we love ya! Moody's will increase the pressure on money managers to take profits in US equities and corporate bonds. Since Moody's has cast the first stone into the US Treasury bond market, the benchmark for risk in debt, the shockwaves of the credit downgrade will spare not even the most obscure outpost of the global financial village. The only consolation is that unlike the case in August 2001, even Dr. Louis Pangloss would have priced in a skeptical risk premium on the tsunami of Treasury supply in the pipeline, given fiscal voodoonomics in Washington and the ominous drum beat of the trade war. Even though none of this is new to the Wall Street cognoscenti, higher interest rates on Uncle Sam IOUs, possibly a 5% yield on the 10 year US Treasury note, means a bloodbath for global debt markets and a spike in volatility that will shred private bankerji crafted, fiendishly complex structured note, which will be explosive landmines in investor portfolios. Fly, Robin, Fly. Up, up to the sky. See also What next for global risk assets and dollar rates? I expect the mother of all swap trades out of T-bonds into non-dollar, non-paper and safe haven assets as the cost of debt service for the planet's borrowers just went up dramatically. This also means illiquid assets like private credit and real estate could prove leprosy in the months ahead, especially in dollar pegged currencies where devaluation cannot act as a macro shock absorber. It was a little uncharitable for Moody's to stiff Trump with this credit bombshell after he just won $2 trillion in commitments to invest in the US from three Gulf petro states. It would be a national disaster if Qatar yanked the yummy $400 million gold plated Boeing 747 that Trump desperately needs as his post-retirement aerial Presidential Library to jet across the world. Young man, there's no need to feel down. I said, young man, pick yourself off the ground Matti trade du jour? Short greenback, bear steepners in Bondland, short crazy val US equities, short Tesla (TSLA) since you are nothing but a hound dog since DOGE only cut the flab by $150 billion and not the $2 trillion Elon promised Planet MAGA. Short Mag-7, short real estate, short private credit, long gold, long crypto, long sterling, long EM. Also published on Medium. Notice an issue? Arabian Post strives to deliver the most accurate and reliable information to its readers. If you believe you have identified an error or inconsistency in this article, please don't hesitate to contact our editorial team at editor[at]thearabianpost[dot]com. We are committed to promptly addressing any concerns and ensuring the highest level of journalistic integrity.
Arabian Post
05-05-2025
- Business
- Arabian Post
My bearish King Dollar and black gold trades are money gushers!
Matein Khalid I have not exactly been reticent in my conviction since last autumn that King Dollar was on the precipice of a seminal monetary regime shift that could mean 40% downside risk on its trade weighted index, as in 2001-06. Yet not in my wildest dreams did I anticipate that the New Taiwan dollar would surge 8% against the greenback, its best performance in 42 years, in only 2 sessions, boosted by a FX short covering squeeze on the prospect of an imminent Trump-Xi trade deal and the repatriation of funds back to the PRC's Renegade Province after an epic dump of American assets. The biggest bang for the buck of the anti-dollar band wagon on Planet Forex now moves from the G-10 constellation to the rock and roll, lock and load world of emerging market FX. Who is the next obvious candidate for a pop against the buckeroo? The South Korean won, the Polish zloty and once the political calculus forces Lula to drop out of the 2026 election, the Brazilian real. The Indian rupee has stopped falling at 84 even though Modi has dawned white gloves for his next 'surgical strike' on Pakistan. For now, the Aussie dollar is a buy on Albanese's landslide win and could hit 0.70 if Trump inks a China deal as a gift to the world to celebrate his 79th birthday on June 14, 2025. Vive le roi et gagnant Orange! It was no surprise that the People's Action Party (PAP) will continue to rule Singapore with Lawrence Wong as its 4th PM since the state was born after the Father, the Son and the Holy Goh. The Sing dollar is Asia's Swissie and I would rather trust my savings to the anti-inflation, pro stability, monetary mandarins of the MAS rather than the Yessir, No-sir, Three Bags Full Sir MAGA creepo whom Trump will anoint as Fed Chairman to succeed Powel and inflate America's obscene debt until the CPI reaches 6% or higher. See also My rationale for $5,000 an ounce Auric before this cycle ends I do not want to sound like a broken record but my current project du jour is to research the world's lowest cost, longest life reserves silver mines with no output hedging overhang. After all, it was not profitable to be a dollar bull in 1978 and the ghost of the Hunt brothers tell me that the white metal was a parabolic monetary paydirt in 1979 and could well be the same in 2026. Prince Abdulaziz has tanked the price of Brent crude, down 4% to 58 a barrel by yet another OPEC supply surge decision. Saudi Arabia has escalated its price war and strategy to preserve downstream market share from OPEC+ cheaters Kazakhstan and Iraq while positioning the Kingdom for the imminent end of sanctions on Russia after the Ukraine peace deal and even Iran if the smoke signals from the Muscat negotiations bear fruit on the White House lawn as Begin/Sadaat and the Rabin/Rafat handshakes did all those years ago. All bets are now off for downside risk in crude oil Also published on Medium. Notice an issue? Arabian Post strives to deliver the most accurate and reliable information to its readers. If you believe you have identified an error or inconsistency in this article, please don't hesitate to contact our editorial team at editor[at]thearabianpost[dot]com. We are committed to promptly addressing any concerns and ensuring the highest level of journalistic integrity.
Yahoo
04-05-2025
- Business
- Yahoo
Is The Damage to the Dollar's Status Permanent?
President Donald Trump's tariff policies and attacks on the Federal Reserve have sown doubts that U.S. assets are as safe as they have been historically. This threatens the dollar's status as the most widely used currency in global trade and weakens the dollar against a basket of foreign currencies. However, analysts say it is unlikely to substantially shift the dollar's role in the global investors recover from a volatile month of tariff headlines, the lingering question on Wall Street is how much the U.S. dollar's status as the pre-eminent global currency has weakened. 'King Dollar' is unlikely to be dethroned anytime soon given the lack of a reasonable alternative, analysts say. The dollar remains the most widely used currency in global trade, a role it's held since the aftermath of World War II, and past efforts to replace it have sputtered. Even so, President Donald Trump's tariff policies and attacks on the Federal Reserve have sown doubts in global financial markets, fracturing that dominance. While he's since eased up on both counts and U.S. stock markets have somewhat recovered, the doubts among global investors don't seem to be fully going away. 'It is hard to put the genie back in the bottle once such concerns are raised,' Morgan Stanley strategist Vishwanath Tirupattur wrote in a note to clients last week. However, he wrote, 'practical realities' will make it difficult to massively shift the dollar's role. Since the dollar is integral to global trade, countries and their central banks hold large amounts of dollars in their coffers. The U.S. dollar made up about 57% of foreign exchange reserves last year, according to the International Monetary Fund, compared to 20% for the Euro, 6% for the Japanese yen and 5% for the Pound sterling. The U.S. dollar was involved in about 90% of transactions in 2022 in the market where investors and companies trade foreign currencies, according to the Bank for International Settlements. There is 'really no alternative' to the dollar, said Brent Coggins, chief investment officer at Triad Wealth Partners in Kansas. The Euro is 'very fragmented,' China's currency doesn't float freely in markets and the yen 'doesn't have scale' to compete, he said. Dollar dominance has long irked some countries—and not just those subject to U.S. sanctions such as Russia or Iran. In the 1960s, a French official said the dollar's reign gives the United States an 'exorbitant privilege,' a moniker that's stuck ever since. More recently, the BRICS countries—which include Brazil, Russia, India, and China—have reportedly dropped the idea of developing a common currency even as they seek to bolster their local currencies in trading arrangements rather than the U.S. dollar. It was the latest victory for the U.S. dollar, which Coggins noted has thus far outlived a series of would-be alternatives. 'Even though it's going through a disruption right now and people are challenging it, it's dealt with challenges before, and it's always come out ahead,' Coggins said. 'We don't see this being any different.' Despite its historical dominance, the dollar is up against a broader 'confidence crisis' in U.S. assets, said Arun Sai, senior multi-asset strategist at the European firm Pictet Asset Management. Investors are questioning whether U.S. Treasury bonds—which the government issues to finance its deficits—are still the 'safe haven' they used to be. They're also shedding some of their holdings in U.S. stocks, with tech firms getting hit hard and worries over the U.S. economy clouding the outlook for others. The selling of U.S. dollar assets has pressured the dollar, which has weakened 8% this year against a basket of foreign currencies. Some analysts think the worst of it may be over. The dollar sell-off was 'atypical and likely temporary,' Wells Fargo international economist Nick Bennenbroek wrote in a research note. While Sai said the U.S. financial markets and 'absolutely exceptional companies' still warrant investment, global asset managers like Pictet are rethinking their heavy U.S. exposures and weighing alternatives. Some are buying gold, which is hitting record highs. German bonds are also a popular option for those seeking a safe haven. Emerging markets are also seeing inflows. Stocks closer to home are becoming a more attractive option as U.S. uncertainty rises, Sai said, adding that Trump's policies have 'incentivized capital to stay domestic.' When looking to deploy cash, Sai said he's weighing assets in Europe and the U.K. 'a little bit more than I would have last year.' However, that could turn around, analysts said. 'We certainly understand why financial markets may be interested in reallocating away from U.S. assets at this particular time, but we ultimately think this shift is tactical rather than a fundamental reassessment of U.S. assets,' Bennenbroek wrote. Read the original article on Investopedia Sign in to access your portfolio
Arabian Post
29-04-2025
- Business
- Arabian Post
King Dollar's freefall will be vindicated by the awful payrolls data!
Matein Khalid My idea of nirvana Xanadu and Lotus Land is an emerging markets strategy bull session in the Waldorf cigar lounge with two bros who can dissect the best money making ideas in EM FX, EM sov debt and EM equities in the dozen odd countries where we see macro fairytales and masala shorts in sectors/countries on the precipice of emerging nightmares from Brazil to Hong Kong, the macro stars are aligned for 3X payoffs in the right puppies! The don't worry be happy mood on Wall Street will end with a traumatic impact for both King Dollar and the US stock market indices in the next week. Why? One, corporate toplines have mostly missed their whisper/whimper numbers and revenues cannot be fudged. So the US economy was the HMS Titanic after it hit the iceberg even though Trump compounded its woes on April 2nd or Liberation Day. Two, the end game of this decelerating economic cycle is a financial cardiac arrest, the reason the Vol Index is still at 25. Three, I am stunned by the sheer scale of household bankruptcies, 90 day credit card delinquencies, disaster in new construction leasing ratios (below 50%), Joe Sixpack inflation distress and outright deflation in Shelter Cost, the largest component of the CPI. So JayPo is a monetary ostrich who is so mesmerized by tariff price shocks and his own ego cat fight with the MAGA muppets in the White House that he is at serious risk of fiddling while Rome burns, a de facto monetary policy Nero. See also Financial panic sweeps at the speed of light Four, Powell has forgotten that he should act as the lender of last resort during times of economic distress, the liquidity Mommy or Big Daddy if you prefer of Wall Street when the plumbing breaks down and asset markets face the big Chill. The Fed funds rate should be zero and not 4.25%. Rest assured it will get there once the market digests the scary implications of shockingly weak April payrolls (thank you DOGE) and a slump in Q2 GDP. Then ex King Dollar will truly begin its fatal kamikaze dive to my eventual target of DXY 70, which I share with the intellectual clowns, economists of the MAGA brigade. Five, America is on the verge of a historic plunge in housing prices that will be no less traumatic than the events of 2008 even as office towers from San Fran to Chicago can be snapped up for 60 cents on the dollar. Those who missed my warnings to establish non-dollar hedges last autumn have now lost 10% of their wealth as the US dollar index suffered its first 10% fall in the first 4-months of a year since 1973. The human brain is genetically programmed by evolution to seek patterns and I would seriously use my brain to heed the distress signal it is sending me from the embattled ex-King Dollar. Six, Trotsky said 'revolution is unthinkable until it becomes inevitable'. His words hold as true to the international monetary regime of 2025 as they did for the fate of imperial Russia that fateful October in Petrograd 1917. See also The anatomy of Tariff Man's global financial crash! Seven, Xi Dada is not responding to Trump's come-hither overtures on a trade deal and the orange man may well have to jet to Tiananmen Square to turn cartwheels and kowtow before the Politburo. Eight, Trump's tariffs constitute the biggest tax hike in American history at a time when the economy was sputtering and corporate America and the consumer was bleeding to death with the thousand sword cuts after the Biden/Covid inflation. This is beyond dumb and dumber. I evoke the ghost of Prince Metternich after Napoleon murdered the Duc d'Enghien in 1804 – 'it was worse than a tragedy, it was a blunder'. Also published on Medium. Notice an issue? Arabian Post strives to deliver the most accurate and reliable information to its readers. If you believe you have identified an error or inconsistency in this article, please don't hesitate to contact our editorial team at editor[at]thearabianpost[dot]com. We are committed to promptly addressing any concerns and ensuring the highest level of journalistic integrity.
Yahoo
09-04-2025
- Business
- Yahoo
Tariff turmoil leaves investors with few hiding places
By Amanda Cooper and Yoruk Bahceli LONDON (Reuters) - Investors are dumping U.S. assets they usually favour in times of turmoil as fear over the economic impact of U.S. President Donald Trump's reciprocal tariffs shakes confidence in traditional safe-havens. The dollar and U.S. Treasuries have taken a beating as Trump's tariffs, plus a 104% duty on China, took effect, while China swiftly retaliated. In contrast, safe-haven favourites such as gold and the Swiss franc continue to pull in cash. The rapid rise in U.S. Treasury yields has worried investors, who fear this could be forced selling to cover portfolio losses and a dash for cash, rekindling memories of the COVID-19 market turmoil. Here is a glance at how traditional safe havens have fared so far during the tariff turbulence: 1/ DOLLAR TAKES BACKSEAT The dollar was the first to lose its shine after Trump announced tariffs, when it dropped along with stock markets. This was an unusual move raising questions about the global standing of the U.S. currency, often dubbed "King Dollar" for its strength and dominance in global currency markets. The dollar has shed more than 5% this year against a basket of other currencies after posting its weakest start to a year since 2016, LSEG data shows. The dollar's failure to benefit from rising U.S. Treasury yields has added to investors' worries because, until now, higher returns on Treasuries relative to other bond markets had boosted the dollar's appeal. "The dollar not getting support from (higher) yields suggests the dollar is not a currency safe-haven," State Street Global Markets' head of macro strategy Michael Metcalfe said. 2/ BOND ROUT Investors initially rushed into government bonds on heightened recession risks, but that has quickly changed. After plunging 26 basis points last week, U.S. 10-year Treasury yields have surged more than 40 basis points so far this week. Longer-dated bonds are the worst hit, with 30-year yields up nearly 50 bps, set for their biggest weekly jump since the early 1980s. Bond yields rise when prices fall. An index of Treasury volatility has risen to its highest since late 2023. Yields have surged even as traders price in faster U.S. Federal Reserve rate cuts, suggesting deliberate dumping of Treasuries rather than selling driven by changes in economic expectations. This is reflected in a widening gap between Treasury yields and interest rate swaps, derivatives used for hedging. Pepperstone senior strategist Michael Brown said that pointed to a real lack of desire to hold Treasuries. "Whether this is participants selling down Treasuries to raise cash in order to meet their liquidity needs, or a representation of how institutional confidence in the U.S. has continued to be eroded, remains to be seen." Investors also believe the unwinding of a widely used hedge fund arbitrage trading strategy between cash and positions in Treasury futures, known as the basis trade, is adding to these market moves. The bond market pain is spreading. In Britain, 30-year bond yields rose to their highest since 1998, putting pressure on the country's stretched finances. 3/ GOLDEN ERA Gold has a long history as a safe-haven asset. It tends to rise in a financial or political crisis. The 1970s energy crisis, the 1980 U.S. recession, the 2008 global financial crisis and the 2020 COVID-19 pandemic all triggered a rise in gold. This time gold has surged to all-time highs above $3,000 an ounce, having almost doubled in the past 2-1/2 years. It was caught up in the broader market selling of the past week, as investors rushed to raise cash to plug losses elsewhere. But gold was up more than 2% on Wednesday, only narrowly below its record peak at $3,167. Central banks and investors, who scooped up gold as a hedge against the inflation spike after the COVID pandemic, have continued buying even as inflation eased. And with Trump's isolationist trade policies playing out, more investors are buying it to protect their wealth. 4/ BACK IN FAVOUR Japan's yen is often the biggest major currency to benefit from safe-haven flows and typically performs well when stocks falter. The yen was set for its best day against the dollar since September on Wednesday and has rallied 7.5% so far this year, while another safe-haven favourite, the Swiss franc, has strengthened just as much. 5/ DEFENSIVE PLAYS Stocks are usually in the front line in recessions and financial crises. Investors take profits, yanking their cash as they run for shelter. But most cannot abandon the equity market entirely, so when trouble hits, they pile into stocks with recession-proof earnings, such as drugmakers, utilities and food and beverages. In the last 25 years, so-called defensive stocks have consistently outperformed cyclical stocks that are most closely linked to the global economy, such as technology or mining shares. Even though there is no sign yet of a recession, a basket of global defensive stocks has fallen less since Trump's November election win than a basket of cyclicals, reflecting investors' caution. Sign in to access your portfolio
