The prospect of a potential trade war between the US and the EU, where a so-called “trade bazooka” has been rattled, sent the dollar down on Tuesday.
On Tuesday afternoon, the dollar traded for less than NOK 10 for the first time this year, with a drop of around one per cent over the past two days.
The price of dollars against Norwegian kroner for the last 10 days.
We see a similar development against the euro, where one dollar now costs 0.852 euros.
The price of dollars measured in euros.
According to the Financial Times, this is happening at the same time as future prices in US shares fall by around 1.5 per cent.
– Calm before the storm
Strategist Dane Cekov at Sparebank 1 Markets believes that what we are now seeing is primarily the result of concern.
– In the main, it is about concern for the type of trade policy being pursued, which will probably hit the US hard and negatively.
– We saw it throughout last year as well: It was the dollar that weakened, says Cekov.
Measured in euros, the weakening is almost 12 per cent since last New Year’s Eve. In kroner, the dollar has fallen from 11.37 to 9.98 kroner.
The concern about a weaker dollar, according to Cekov, is a kind of self-fulfilling prophecy:
– Global pension managers hedge against further dollar weakening, and much of the weakening we saw last year can be explained by currency hedging, says Cekov.
Hedging is complicated, but a In practice, such hedging works, by selling dollars ahead of time.
He points out that there is currently no indication that major changes are actually taking place in investments:
– The market is worried, but it is not as big as before Liberation Day. It is not the big endings in placements, which will come if this actually becomes something. But investors have burned themselves in the past for relying far too much on what is being signaled from Trump, he says.
The price of gold continues to rise
At the same time as the dollar weakens, the price of gold continues to rise.
At the time of writing, gold is trading for $4,719 per ounce, up around 2.3 percent from before the weekend.
On Monday last week, the gold price passed 4,600 dollars for the first time.
Also read: The gold price skyrockets – fears Trump interference
