Aswat Asharq Al-Awsat :

Aswat Asharq Al-Awsat : Dollar Stays Strong, Political Uncertainty Saps Euro

People walk past a currency exchange office in St. Petersburg, Russia, Thursday, June 13, 2024. (AP Photo/Dmitri Lovetsky)
People walk past a currency exchange office in St. Petersburg, Russia, Thursday, June 13, 2024. (AP Photo/Dmitri Lovetsky)
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Dollar Stays Strong, Political Uncertainty Saps Euro

People walk past a currency exchange office in St. Petersburg, Russia, Thursday, June 13, 2024. (AP Photo/Dmitri Lovetsky)
People walk past a currency exchange office in St. Petersburg, Russia, Thursday, June 13, 2024. (AP Photo/Dmitri Lovetsky)

The dollar held firm on Monday, while the euro traded around more than one-month lows, as political turmoil in Europe ramped up the level of uncertainty among traders, while investors awaited more data to gauge the strength of the US economy.

Investors have been contemplating the risk of a budget crisis at the heart of the euro area, as far right and leftist parties gain momentum ahead of France's snap parliamentary election, pressuring President Emmanuel Macron's centrist administration.

Even after the French financial markets endured a brutal sell-off late last week, European Central Bank policymakers have no plans to discuss emergency purchases of French bonds, five sources told Reuters.

The euro eased 0.1% to $1.0699, after falling to its lowest since May 1 at $1.06678 on Friday. The currency also logged its biggest weekly decline since April at 0.88% last week.

"With traders wanting certainty, this may not come until after the second-round vote (July 7), so the prospect of further downside in French and EU markets is real," Chris Weston, head of research at Pepperstone, said.

The dollar index, which tracks the US currency against a basket of six others, held around its highest since May 2, driven mostly by weakness in the euro.

The single European currency "accounts for around 57% of the US dollar index weighting, the fall of the euro has indirectly benefited the dollar,” said Matt Simpson, senior market analyst at City Index.

Minneapolis Federal Reserve President Neel Kashkari said on Sunday it was a "reasonable prediction" that the US central bank would cut interest rates once this year, waiting until December to do it.

The Fed published updated projections last week that showed the median forecast from all 19 US central bankers was for a single interest rate cut this year.

LIGHT WEEK FOR DATA

This week is light on major US economic data to help clarify the Fed's outlook, although US retail sales on Tuesday and flash PMIs on Friday may give hints about consumption and economic strength.

"Data would likely have to miss estimates by a wide margin to rekindle bets of more Fed cuts, with the FOMC meeting still freshly in the minds of investors," said City Index's Simpson.

Sterling fell 0.1% to $1.267. Britain's inflation pressures still appear too hot for the Bank of England to cut rates at its June 20 meeting, with a majority of economists polled by Reuters forecasting the first cut would not come until Aug. 1.

Meanwhile, the yen remained pinned near a 34-year low against the dollar after the Bank of Japan on Friday pushed cuts to bond buying amounts and details of its tapering plan to its July policy meeting.

Governor Kazuo Ueda said he would not rule out raising interest rates in July as weakness in the yen pushes up import costs, although that may not be the hawkish statement that some took it to be, said Hiroyuki Machida, director of Japan FX and commodities sales at Australia & New Zealand Banking Group.

"The sense was that raising rates and tapering are two separate things" that the BOJ would decide whether or not to do based on different criteria, he said.

The yen steadied at 157.49, after slipping to 158.26 after Friday's decision, its lowest since April 29.

The yen's decline to 160.245 per dollar at the end of April triggered several rounds of official Japanese intervention totaling 9.79 trillion yen. In cryptocurrencies, bitcoin was last up 0.7% at $66,220, while ether fell 1.2% to $3,553, according to LSEG data.



Aswat Asharq Al-Awsat : Saudi SAMA Explores Potential of Digital Currencies to Facilitate Payments Globally

The Saudi Central Bank. (Aswat Asharq Al-Awsatt)
The Saudi Central Bank. (Aswat Asharq Al-Awsatt)
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Saudi SAMA Explores Potential of Digital Currencies to Facilitate Payments Globally

The Saudi Central Bank. (Aswat Asharq Al-Awsatt)
The Saudi Central Bank. (Aswat Asharq Al-Awsatt)

With many consumers abandoning physical cash, and in light of the accelerating development of crypto-currencies, central banks in the world have started working to ensure a legal and safe cover for the use of digital currencies.

According to the Bank for International Settlements (BIS), 135 countries and monetary unions, representing 98 percent of global GDP, are exploring digital currencies for central banks, compared to only 35 countries in 2020.

The International Monetary Fund (IMF) indicates that about two-thirds of the countries in the Middle East and Central Asia are considering adopting digital currencies for their central banks as a means to enhance financial inclusion and improve the efficiency of cross-border payments.

The Central Bank of Saudi Arabia (SAMA) joined as a full participant in a multi-country digital currency initiative, known as the mBridge project, which was positioned as a potential alternative to the SWIFT payment system to enable faster and potentially cheaper international payments.

Head of Development at Binance in Saudi Arabia Bandar Altunisi told Aswat Asharq Al-Awsatt that the mBridge project was a cooperative initiative led by the BIS to explore the potential of digital currencies issued by central banks to facilitate trade and instant cross-border payments.

The project includes the central banks of China, Thailand, Hong Kong, the United Arab Emirates and Saudi Arabia.

In addition to the five participating central banks, the project includes 27 other official entities with observer status, such as the IMF, the World Bank, and central banks in many countries, including Norway, South Korea, and Türkiye, according to Altunisi.

“The mBridge project, which was launched in 2021, represents an innovative solution to address the gaps and challenges of inequality in the current procedures used for cross-border payments,” he explained.

Altunisi believes that the success of this project will contribute to accelerating cross-border payments and reducing their cost.

As for the importance of this project for Saudi Arabia, he noted that it will provide new settlement solutions for oil and gas exports. On a broader scale, trade will become more efficient, ultimately benefiting all parties involved, including the final consumer, he remarked.

He added that additional expertise in the field of Blockchain and distributed ledger technologies (DLT) provided by the mBridge project will give regulatory authorities in Saudi Arabia more comfort and ease in allowing broader regulation and application of crypto-currencies and other solutions based on Blockchain technology.

Altunisi spoke about the difference between digital currencies that central banks are considering adopting and encrypted ones, such as Bitcoin and Ethereum. He noted that the latter are decentralized currencies that use encryption techniques to boost the security of transactions and rely on Blockchain technology to ensure transparency and immutability of transaction records.

Digital currencies are digital copies of paper currencies issued and regulated by central banks, Altunisi stated, adding: “Unlike crypto-currencies, these digital currencies are centralized and usually aim to improve the efficiency of payment systems, bolster financial inclusion, and provide governments with better monetary policy tools.”