The safe-haven US dollar rose on Monday following a fresh batch of disappointing data from China reinforced fears of a global recession, while the yuan fell following the People’s Bank of China surprisingly cut interest rates. China’s industrial production, retail sales and fixed asset investment missed analysts’ estimates on Monday, as the nascent recovery from harsh lockdowns to combat the COVID-19 pandemic faltered. “Of course the bad data from China affects recession fears for the rest of the world,” said Ipek Ozkardskaya, market analyst at Swissquote. He added that this pushed the euro down once morest the dollar. The dollar also received a boost from hawkish comments from Federal Reserve policy makers, in response to early indications that US inflation may have peaked. Richmond Federal Reserve Chairman Thomas Barkin told CNBC on Friday that he would like to see inflation head toward the Fed’s 2 percent target “for some time” before stopping interest rate hikes. The onshore yuan fell to a one-week low of 6.7696 per dollar, compared to the previous close of 6.7430, following the People’s Bank of China unexpectedly cut borrowing costs on medium-term loans and a short-term liquidity instrument for the second time this year. The US dollar index once morest six rival currencies rose 0.25 percent to 105.96, consolidating its position near the middle of its range this month. Analysts will look at the minutes of the Federal Reserve’s latest meeting, due on Wednesday, for more clues regarding what policy makers are thinking, while Friday’s retail sales data will give some fresh insights into the economy’s health. The euro fell 0.24 percent to $ 1.0232, affected by the troubles facing Europe due to the war in Ukraine, the search for non-Russian energy sources and the damage to the German economy from the lack of rain.
The dollar recorded more losses once morest other major currencies on Thursday, following traders reduced their bets that the Federal Reserve (the US central bank) will raise interest rates strongly following US inflation data that came the previous day, weaker than expected. And the dollar index, which measures the performance of the green currency once morest a basket of currencies, remained low in the early hours of European trading, following it recorded its largest daily decline in five months, reaching one percent the previous day. Data released on Wednesday showed that US consumer prices were unchanged on a monthly basis in July following rising 1.3 percent in June. “Yesterday’s data gave hopes that inflation has peaked and the Federal Reserve will need to moderate its rate hikes to keep inflation in check,” currency analysts at German Commercial Bank said in a note. Traders have scaled back bets that the Federal Reserve will raise interest rates by 75 basis points for the third consecutive time at its September policy meeting, and now see a half-point increase in interest rates as the most likely option. The euro rose a quarter of a percentage point to $1.03255. The yen rose 0.2 percent to 132.615 per dollar. Sterling broadly stabilized at $1.22250, following gaining more than 1% the day before.
Hussam Abdulnabi (Dubai)
The arrival of the US dollar to the parity rate with the euro constitutes a good investment opportunity to purchase European assets at a lower cost and the lower cost of production inputs and imported goods from European countries, according to economic experts.
They demanded the necessity of realizing that the rise in the dollar exchange rate once morest the euro is not a product of the strength of the American economy, but rather came as a result of the increase in demand for the dollar due to the interest rate hikes and the directing of liquidity to American deposits, which means that the gradual rise of the US dollar once morest the euro may be followed by rapid declines later. The dollar exchange rate reached parity with the euro exchange rate, in global markets last Tuesday, for the first time in nearly 20 years. The European currency is receiving pressures due to fears of an economic recession in the eurozone, amid the ongoing energy crisis and expectations to raise interest rates by the European Central Bank (ECB) at its next meeting in July 2022, as the value of the euro has fallen since the beginning of this year by 12.19 percent compared to its prices. The beginning of the current year 2022.
a future vision
Jamal Saif Al-Jarwan, Secretary-General of the Emirates Council for Investors Abroad, stressed that the dollar’s reaching the parity rate with the euro constitutes an opportunity for the Emirati investor to buy European assets at a lower price, as the depreciation of the currency often favors the investor, but he stressed the need for such investments to be cautious. The future outlook for it should be medium to long-term, especially since the Russian-Ukrainian war has struck the European economy in the depths. It is expected that stability and economic growth will not return to the European continent before 3 years.
Al-Jarwan identified a number of conditions to successfully exploit the decline of the euro once morest the US dollar, the most important of which is anticipation of the results of the meeting that took place between the French president and heads of global sovereign funds and representatives of banks and international financial institutions last week in what was called the “Paris Summit”.
He added that this meeting shows that the leaders of European countries are trying to convey reassurances to the global sovereign funds regarding the future of European economies, especially since the future outlook on the old continent has become negative.
Al-Jarwan pointed out at the same time that the results of that European movement and the results of those meetings will be the decisive factor in making the investment decision, but without ignoring the fact that the current European crisis will eventually end and things will return to their rightful place if the repercussions of the Russian-Ukrainian war end, whether on prices Energy or industrial sector stability and the single European currency rate.
Repercussions vary
For his part, Dr. Ahmed bin Hassan Al-Sheikh, an economic expert, said that the repercussions of the US dollar reaching the parity rate with the euro vary according to the vision for that matter, and he explained that if we look at the decline of the euro once morest the dollar as the UAE is an importing country from European countries, this leads to The interest of the state due to the decline in the prices of raw materials and imported production inputs. On the other hand, if we look at the matter as the UAE is an exporting country, the decline of the euro once morest the dollar will have a negative impact through the increase in the cost of UAE exports to European countries.
He added that the same applies to the movement of investments. On the positive side, the decline of the euro once morest the dollar represents an opportunity to direct Emirati investments to European countries due to the decline in the value of European assets and due to the linkage of the Emirati dirham to the US dollar, noting that, on the other hand, the impact will be negative on the movement of incoming European investments. To the state as a result of the fact that the value of investments in euros will decrease when converted into UAE dirhams.
Regarding the advice that the investor should follow in his expectations for the price of the US dollar during the coming period, Sheikh said that it is necessary to realize that the strength of the US dollar at the present time is not the result of the strength of the US economy, which is still suffering from internal problems, but rather as a result of the US Federal Reserve’s decisions to raise the price of the dollar. Interest is to curb inflation with almost certain probabilities of further hikes.
He continued: The rise in the US interest rate and the emergence of reports that expect the total increase to reach 350 basis points until the end of this year, increased the demand for the US dollar in order to benefit from investing in US deposits of attractive returns, noting that the second element behind the rise of the dollar once morest the euro was represented in The Russian-Ukrainian war, which led to a state of political and economic instability in the eurozone in general, and consequently the single European currency fell once morest the US dollar at a greater rate than the decline of other international currencies once morest the US dollar.
Al-Sheikh pointed out that the expectations in general are that the dollar will continue to rise once morest the euro until the first quarter of next year at least, warning that investing in the US dollar may be a good investment in the short term, and it should be noted that the US dollar’s rise is gradual once morest The euro may be followed by rapid declines, which requires caution and attention to global market indicators in order to avoid losses if the dollar begins to decline.
investment trends
In turn, Tariq Qaqish, CEO of Salt Fund Financial Consulting, stated that the trends of local investors will be dependent on two main factors: the strength of the US dollar once morest the euro, and the increase in US interest rates, as the current investment trends aim to benefit from the high interest rate on deposits. Banking in the United States and expected continued rises during the coming period.
He said that although the strength of the US dollar, and thus the dirham associated with it, may have a negative impact (in theory) on European investments in the real estate sector in the country, the high rate of return on real estate investment in the country maintains the attractiveness of the real estate sector, especially as it It exceeds the interest rates on bank deposits, which makes the real estate sector maintain its position among the most important sectors that attract investments.
Investing in real estate
Tariq Qaqish said that the decline of the euro once morest the dollar may constitute an opportunity to invest in real estate in a number of European countries, but the majority of Emirati investors prefer to invest within the country due to the political and economic stability, which makes the demand always present in the real estate sector, especially in Abu Dhabi and Dubai.
July 12 2022 10:59
Gold prices fell globally during today’s trading, to continue their decline following yesterday recording their lowest level in 9 months, with the continued rise of the US dollar.
Investors’ appetite for the yellow metal was affected following the significant rise in the price of the US dollar, which has become a preferred haven for investors to hedge once morest fears of a possible recession following the move by major central banks around the world to raise interest rates to control inflation rates.
The US currency is receiving strong support in light of expectations that the US Federal Reserve will raise interest rates at a faster pace than its counterparts around the world.
By the time “10:22 am UAE time”, the prices of the yellow metal fell in spot transactions by 0.25% to $ 1729.92 per ounce, while gold futures fell by 0.21% to $ 1721.65 per ounce.
In terms of other precious metals, silver fell 1.39% to $18.86 an ounce, palladium fell 1.57% to $2111.7, and platinum fell 1.41% to $847.1.
Source: wam