Small retail traders
conspire on social media to buy shares in companies that are often bankrupt. Earlier
these shares were sold by hedge funds after analyzing the company's
fundamentals and concluding that the shares should decline. But the insane
growth of the shares of these companies hundreds of times after the agreement
to buy retail investors on social networks is forcing hedge funds to fix losses
and cover them by selling other assets, including those purchased earlier for
US dollars. As a result, the dollar rises again
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| Dollar to Yen chart at 15 minute intervals |
The dollar rallied and risk-sensitive
currencies fell on Friday after an attack on short positions in US hedge funds
eroded investor confidence and boosted demand for safe-haven currencies.
So, shares in video game seller
GameStop Corp and headphone maker Koss Corp doubled in premarket Friday as
hobbyist traders returned a day after online brokerage apps, including
Robinhood lifted restrictions on stock purchases.
Changes in foreign exchange markets
were marginal, with the dollar still within recent trading
ranges. However, the dollar buying underscores that fears of sharp
fluctuations in stock prices were felt across all markets.
The dollar has benefited from safe
asset purchases since the start of the week, when investors worried that
President Joe Biden's budget spending package would not be as large as he
previously announced: $ 1.9 trillion.
The introduction of the COVID-19
vaccine around the world is also facing challenges, adding to investor
concerns. The production delays have resulted in a squabble between the
European Union and drug manufacturers over how best to allocate the limited
supply available.
"We could see how the dollar
will maintain some positive momentum ahead of the weekend amid demand for
defensive assets: in this sense, it is worth closely monitoring further
developments in the story of Robinhood," said ING, referring to brokerage
activities popular with retail clients. that are attacked by hedge funds.
In early London trading, the dollar
index, which measures the dollar against a basket of currencies, rose 0.2% to
90.739. It has grown by half a percent in a week.
The euro fell 0.1% to $ 1.2107 after
the release of German fourth-quarter GDP data at 09:00 GMT.
Germany's economy grew just 0.1% in
the fourth quarter as the second wave of coronavirus nearly halted Europe's the largest economy after a sharp recovery following an initial outbreak in the
third quarter, official data showed on Friday.
The resumption of quarantine late
last year hit private consumption, while merchandise exports and construction
boosted the economy, according to the Federal Statistical Office. A Reuters
poll predicted a 0.0% growth in the fourth quarter.
The dollar rose 0.6% against the
Japanese yen to 104.64.
The Swiss franc, another currency
that investors often buy when they are nervous, moved slightly against the euro
and traded at 1.0771.
Risk-sensitive currencies like The Australian dollar fell. Most emerging market currencies also fell.
The Chinese yuan strengthened to
6.4695 yuan per dollar in offshore markets.
The People's Bank of China (PBOC)
poured 100 billion yuan into the financial system on Friday after a week of
liquidity squeeze, sparking fears that the central bank is actually tightening
monetary policy.
Despite the dollar's gains this week,
most analysts stick to their forecasts that it will weaken in 2021 as the new
US government spends massive fiscal spending while the Federal Reserve
maintains its ultra-soft monetary policy.
“The overall trend really reflects
the concerns around the US dollar,” said Michael McCarthy, chief strategist at
CMC Markets in Sydney.
"Broad expectations for a major
new bond issue and support from the Fed mean that we expect the US dollar to
weaken further in the medium term."
Tommy Wilkes and
Kevin Buckland © 2021 Thomson Reuters
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