Another positive tone for Asian equity markets, as the Biden administration’s fresh restrictions on tech exports to China fell short of earlier proposals that would have sanctioned more key Chinese firms. Treasuries slipped in Asia following Fed Governor Christopher Waller’s assessment that he’s inclined to vote for a rate cut in December. In Europe, Marine Le Pen pledged to topple Prime Minister Michel Barnier’s government after he failed to meet her demands on a new budget, threatening financial and political disruption for France.
In corporate news, oil major Exxon Mobil Corp. is considering a sale of its gas stations in Singapore.
On the macro front, there was an interesting article outlining the position of a strong dollar versus its use as a reserve currency. Essentially, over the past twenty years, the percentage of USD in global FX reserves has been slipping. The USD remains the dominant currency by a large margin, with around 58% of reserves held in USD. Although US sanctions and trade wars provide incentives for certain countries to move away from using the USD, IMF data shows few signs that recent trade frictions have accelerated the greenback’s decline. There has, however, been an increase in CNY in reserves, and some central banks have boosted their holdings of “politically neutral” gold. The dominance of the USD is closely linked to the number of trade invoices still written in USD. BIS data (2022) shows that around half of global trade invoices are denominated in USD. It follows that if countries move away from invoicing in USD, the currency’s dominance in FX reserves would continue to slip.
The data front is quiet today, with speeches from the Fed’s Adriana Kugler and Austan Goolsbee dominating proceedings.
Market-wise, Bitcoin hovers at $96,000, the yield on 10-year Treasuries is 4.21%, West Texas Intermediate crude opens at $68.50 a barrel, and spot gold is at $2,645 per ounce.
