Caution the Dollar's Rise

The dollar index gains to an intraday high of 107.15 and sets a new record against the Rupee as global risk premiums rise. Knock-on effects warrant caution.

November 21, 2024 • Est. Reading Time: 2 minutes

Mobius Intel Brief:

The dollar hit an all-time high versus the rupee and gained against almost all major currencies in the dollar index (DXY) today. DXY inched closer to a two-year peak, hitting an intra-day high of 107.15 before paring gains to hover around 107.

Key Intel:

  • Geopolitical conflict, tariff threats, yield spreads, and non-US recession risks are driving demand for the dollar.

  • USD scarcity presents a problem for foreign markets with outsized trade imbalances against the US — narrowing a trade surplus requires USD for dollar-denominated transactions.

  • The dollar’s rally over 107 today warrants caution — rapid appreciation from foreign demand for USD elevates risks that foreign reserve managers and central banks will rush to create liquidity for local companies by dumping USTs.

The Treasury Dept’s 3Q24 data reflects exporters’ concerns about a dollar shortage — particularly after depleting USD reserves with currency intervention. Japan sold a record $61.9 billion in USTs in Q3. Chinese funds sold over $51 billion in USTs — the second-most on record.

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This commentary contains our views and opinions and is based on information from sources we believe are reliable. This commentary is for informational purposes, should not be considered investment advice, and is not intended as an offer or solicitation with respect to the purchase and sale of commodity interests or to serve as the basis for one to decide to execute derivatives or other transactions. This commentary is exclusively intended for Mobius clients and is not considered promotional material.