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Dollar Taking a Breather as Stocks Rally

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Monday saw a new optimism in the markets as stocks rally, led by financial and energy sectors, in the wake of a new stimulus deal that helps major indices regain ground after the September sell-off. The S&P500 closed Monday up 1.61% to 3,352 points with Crude sharing the optimism by holding above $40 a barrel. Nevertheless, risk-off mood is still evident as US 10-year Treasury yield is still holding steady around the 0.66% level since last week.

Recent remarks by President Trump that he will refuse to commit to a peaceful power transfer if he loses the election to Biden, and the Supreme Court will have to intervene and declare the winner; made markets jitter and sparked the recent Dollar rally that subsequently saw UBS long USD/CAD reached it’s profit target. In another trade, UBS sell limit on USD/JPY was filled last Friday as the pair reached the height of 105.70

                   Source: CFTC

Latest CFTC Commitment of Traders report shows that speculative accounts increase their net USD shorts by $2.79 billion, which is more than the $1.45 billion in profit taking a week earlier. The biggest beneficiary is the Euro, with $1.48 billion new flow, followed by Yen and Swiss, with $810 million and $502 million respectively.

 

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Abdul H. Jaffar