Free Trial
USDCAD TECHS

Cements Short-Term Reversal

US EURODLR OPTIONS

BLOCK, Late put Fly

AUDUSD TECHS

Extends Break of the 50-Day EMA

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access
USD

Goldman Sachs note that “the USD’s surge continued late last week, and Chair Powell indicated in remarks to Congress that the Russia-Ukraine conflict is unlikely to dissuade the FOMC from raising rates later this month. However, the sanctions applied by Western governments in response to the invasion could have negative implications for the greenback over the longer-term. All transactions in U.S. Dollars eventually pass through the U.S. financial system, which allows the U.S. government to implement its foreign policy goals through financial sanctions. While this is useful from an American standpoint, it raises concern among many other countries about vulnerabilities created by a heavy reliance on Dollars. For example, after the U.S. applied sanctions on Russia following the annexation of Crimea, the CBR began to “de-Dollarize,” shifting a large portion of its reserves out of the U.S. Similarly, when launching its latest efforts to internationalize the EUR, the EU Commission noted that U.S. use of extraterritorial sanctions represented a “wake-up call regarding Europe’s economic and monetary sovereignty.” While we believe the USD’s international role will not change overnight, there is a risk that aggressive sanctions on Russia - which have essentially cut the country off from Western financial markets - will encourage other countries to diversify foreign exchange reserves and trade invoice currencies away from USD. Because European governments also participated in Russian sanctions, the main beneficiary will likely be CNY; non-sovereign money mediums like gold and Bitcoin may also gain from de-Dollarization efforts. Importantly, the size and liquidity of these markets is much lower than U.S. capital markets, which will likely constrain the pace of any de-Dollarization.”

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

To read the full story

Why Subscribe to

MarketNews.com

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.