As the world's largest and most diversified economy, U. So nearly one out of every five dollars in global economic value is created in the United States. Investors also like the relative safety of U.
Treasurys, which are easily traded and currently pay a higher yield than government bonds issued by other large economies, such as Japan and big European countries. Read More Confused by currencies? Buy a Big Mac. Even though rates on Treasurys are historically low, they're still higher than the competition.
The year U. Treasury yield has fallen to 1. But the yield on Germany's year recently hit just. Some shorter-term German bonds are actually paying negative interest rates, which means investors end up losing a little piece of their savings just to keep them safe. Those yields are something of a moving target, as central banks around the world continue to tinker with the supply of their local currencies. At the moment those forces are also propping up the dollar.
In the U. European central bankers, meanwhile, recently announced they're going to flood the financial system with euros, driving down rates and further reducing their value against the dollar. Currency exchange rates are a two-way street, and the dollar's strength is measured in relative terms. The dollar also gained 0. In the cryptocurrency market, bitcoin was down 2. N said a press release regarding the retailer's partnership with the cryptocurrency was fake. Litecoin rose as much as Subscribe for our daily curated newsletter to receive the latest exclusive Reuters coverage delivered to your inbox.
Slew of U. More from Reuters. So why is the dollar rising instead? A rise in infections and new and extended business lockdowns in several European countries are weighing on economic growth expectations for the eurozone, translating into weakness for the formerly robust euro.
Meanwhile, a robust U. For much of the pandemic, there was a relatively strong relationship, with a weaker dollar translating into stronger global equities see chart above. That occurred as central banks across the developed world cut policy interest rates to what they considered the effective lower bound and pledged to keep them there for some time, which meant relative moves in interest-rate expectations were fairly small, Allen explained.
As a result, investor appetite for risk, which tended to mean a weaker dollar, became the main driver of developed market exchange rates. The relationship started to break down at the beginning of this year, however, as the dollar took back some ground even as global stock markets continued to climb, Allen noted.
Capital Economics expects the dollar to strengthen against the yen and euro because bond yields in Japan and the eurozone have the least scope to rise. The Citadel Securities founder knows funny, and saying that his firm plotted to stop the GameStop short squeeze is not it.
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