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U.S. dollar strength continues against most major currencies

Yahoo Finance’s Jared Blikre breaks discusses the strength of the U.S. dollar.

Video transcript


BRAD SMITH: --currencies here. The dollar is up against most major currencies right now. Let's bring in Yahoo Finance's Jared Blikre for more on this, too. Jared.

JARED BLIKRE: That's right. And looking at our currency heat map, now everything here is based on the US dollar. Some of these are inverted to what we normally see in Forex land. But if it's green, that means it means the US dollar has advanced today. So taking a retreat with respect to a lot of these currencies.

But let me just pull up the Chinese yuan. I don't know if we talk about this enough. But this has been on an absolute tear this year. You can see up about 12%, 13%. That is a huge amount in currency terms.

And I just want to reiterate this point because I want to hit it home several times, as I've been doing, that these huge moves in currency land, these have spillover effects because these trades are all highly leveraged. Same thing in the bond world. So that when we see bond markets and the currency markets heat up, well, that spills over, that volatility, into equities.

Now, let me show you what's happening on a one-month basis because we are now seeing the US dollar advancing over 11% versus Norwegian krona, versus the British pound it's up 10%, versus the Australian dollar it's 7 and 1/2%, South Africa, Sweden, Argentinean peso. You get the picture here. These are huge moves.

And all of this, well, a lot of these countries are borrowing in US dollars. So this has knock on effects for emerging markets, has knock on effects for commodities, which are priced in US dollars, especially WTI crude oil. The entire world-- excuse me, plays in that trade. And so we see a lot of fallout from this in the equities markets, guys.

JULIE HYMAN: I want to zero in on the pound for just a sec, Jared, because obviously, that's the one that's really been most in the news in the past week or so, as we've gotten the new plan from the government there. And it's really been acute pain for the UK, as-- based on all of that.

JARED BLIKRE: Yes, it has. And this is the US dollar versus a British pound. This is inverted. But this shows you this huge spike up yesterday. This was when the US dollar strengthened versus a pound. A lot of people are calling this a mini flash crash.

And you take a look-- let's take a 10-year look back. Now, when we go back all the way to 2016, 2015, this was the area of the Brexit. And this is when the markets were pricing this in. This is when it finally happened.

Let me just show you what this was happening with the normal cross when we are looking at this from their perspective-- it doesn't look like I'm gonna be able to get that right now. But nevertheless, George Soros was betting on the level of 1.2% with respect to the British pound and now we are approaching parity. And so I think that's good news for shoppers who are going abroad and spending their dollars. But not necessarily for those people living over there.

This has yet to play out fully. I want to make that known. These flash crashes that we're seeing in various currencies, probably gonna have a few more of those because we are in an illiquid market situation and it's gonna take a lot more than Federal Reserve jawboning, for instance, to cure this situation.

BRIAN SOZZI: Glad you mentioned the Federal Reserve there, Jared. We're getting some commentary this morning from Fed Chief Jerome Powell on cryptocurrencies, saying, quote, "There's a real need for better crypto regulation." What are you seeing there? Any moves there in the early going?

JARED BLIKRE: Yeah, crypto is actually heating up. And let me go back to one of our heat maps here for crypto. It's been really nice to see this move because we were teetering on very, very sketchy territory.

Now, you'll notice, this is a 5-- 10-year chart here. 20,000 was the level in late 2017. Those were the highs. And although we've breached those, we've gone all the way down to about 17,000 and change, we have more or less respected those levels.

Here is a year-to-date look. You can see here's where we went down to 17,000. Basically, testing those levels right now. Huge basing period for crypto, for Bitcoin right now. If we can break to the upside break, let's say-- oops, if we can break 25,000, 26,000, that is a big resistance level.

And then we can think about some of these other big psychological levels, like 30,000 to 40,000. But 25 is a big one. If we breach 17, I think this crypto winter goes on for a long period of time.

Let's take a look at the 10-year one more time. Yeah, it took a long time to rebound from the previous one. This was three years. And it could be a similar amount this time. But we've got to hold those lows, guys.

JULIE HYMAN: Yeah, I was gonna say, it's a lot closer to that 17 lower bound than that 25--


JULIE HYMAN: --upper--

BRIAN SOZZI: Good analysis.

JULIE HYMAN: --range.

BRIAN SOZZI: I like that. Good one.

JULIE HYMAN: I mean, just look at things--

BRIAN SOZZI: I like it. I like it.

JULIE HYMAN: --as if we get to 25. But then it feels-- it feels-- it feels like a big gift.

JARED BLIKRE: It's all about the feels.

JULIE HYMAN: That's all I'm just trying to say right now. Thank you, Jared. Appreciate it.