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There are headlines and sound-bites on Wednesday that certain global regions will be adjusting their Used reserve holdings, something that has been bubbling under the surface as a 'major news headline' for ten years now. The fact that global commodities are priced in dollars, and the fact that there is no other currency that can be traded for goods and services all over the world, in the remotest of regions, leads this to be nothing more than noise, TheLFB Trade Team said.
Yes, the global market is saturated with dollars, to the extreme that the Fed does not print money supply numbers in full any more, but the fact that nearly 70% of global reserves are in Usd denominations leaves a very powerful currency that may depreciate because of other factors including positive equity market trade, or gain in value when Treasury yields move higher; but liquidating dollar reserves to a degree that will impact currency values globally will take decades.
The headline screams a dollar move may happen because of it, but in reality the headline could be more dollar positive right now than anything else; it comes at a time that few global regions are showing growth, and therefore are being forced to the safety of the Usd to off-set a rising regional currency that no area wants as the re-building takes place. We are seeing in trade on Wednesday that the dollar has buyers on weak equity trading days, and that is how it is likely to stay, The Trade Team said. The variable will not be in regional headlines, it will be in a rating downgrade that forces the move away from the dollar; until that may happen, the dollar will remain the King of Currency.
We await the Fed's Beige Book at 14:00 EDT, there will be movement as that is released and we will cover potential ahead of time, the global reserve will move at 14:00 EDT, they said.