The dollar experiences a correction as the market keeps a calmer tone
There is only but one theme in the currencies market and that is dollar selling today, as the greenback retraces gains on the week. The wild swings continue as we see sharp moves in the aussie, kiwi and pound ahead of European trading.
Do note that these are also the currencies that have fallen the most against the dollar this week, with the aussie falling to its weakest levels since 2002-03 and sterling having dropped to its weakest levels since 1985.
Oil is also seeing a decent recovery after nearing $20 two days back. Price is now trading at $26 and that is keeping the loonie underpinned over the past few sessions.
The movement in the euro, franc and yen are comparatively "mild" but we are seeing USD/JPY slip back under 110.00 for the time being at least.
The dollar correction may feel overdue after having seen unrelenting and disorderly moves over the past few days - if not the past week or so. Much like how dead cat bounces can be sharp and violent, the retracements here can be similar in nature as well so be wary.
The key question is have we seen dollar funding pressures ease up and are we going to see turnaround in the market? Well, basis swaps are saying don't get too carried away. The yen-dollar 3-month basis swap spread is still as wide as when we started the week:
