Dollar Continues to Benefit From Falling Global Equities


Dollar Continues to Benefit From Falling Global Equities

AUGUST 20, 2021

The U.S. dollar extended this week’s rally overnight as the sell-off in global equities deepened, benefitting the greenback. 


Hong Kong’s benchmark Hang Seng Index entered a bear market after falling more than 20% from its peak.  China has ramped up regulatory curbs on many Chinese industries wreaking havoc on risk appetite in Asia.  The pain was also felt in Europe with the Stoxx 600 on track for its biggest weekly loss since February.  U.S. futures show American shares will open solidly in the red.

At the time of writing, the Bloomberg Dollar Index is up 0.2%, representing a fifth straight daily gain and its longest positive run in two months.

There is no major economic data set for release today so the greenback will continue to trade with the prevailing risk sentiment, which is likely to prove to be dour.

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The fall of the Canadian dollar has been swift and there seems to be no end in sight.  The loonie dumped another half of a percent of value versus the U.S. dollar overnight and is not at its weakest level since December 2020.  The price of West Texas Intermediate fell nearly a percent again, representing its seventh consecutive session decline.   The Norwegian krone led overnight losses, correlating with the fall of oil.

Perhaps the economic docket can lend the beleaguered currency a hand.  Later, Canadian retail sales will cross the wire with economists expecting a gain of 4.5% in June after a slight contraction in May.


The British pound fell again against the U.S. due to a combination of widespread risk aversion and dollar strength and poor British economic data.  U.K. retail sales unexpectedly fell by its fastest pace since the economy was in lockdown in January.  Total sales dropped 2.5% in July after a modest 0.2% uptick in June.  The fall is much sharper than the 0.2% decline that economists had forecast.

Bloomberg News points out that weak retail sales and a lower inflation number earlier this week will ease pressure on the Bank of England to pare back its stimulus program.  If the Bank of England maintains easy policy and the Fed indicates next week that the U.S. central bank will soon begin tapering its stimulus, the sterling could see further losses.