Weekend brain food VI

Like a school kid who becomes hardworking only when her mom tells her she can go out to play if she finishes her homework, I am seeing that playground now. 

The 'rushing homework time' now begins...

Photo by Ben White on Unsplash

"The value of American stocks, especially those that are included in market indexes, tend to increase along with the demand for U.S. dollars."

"The dollar automatically strengthens when the euro weakens. That’s because the euro makes up 57.6% of the value of the U.S. dollar index. This means that whatever makes the euro weaker will make the dollar stronger and vice-versa. Each of the other currencies in the USDX has less influence on the dollar’s value." [source]

My take:

The strengthening of US dollar is probably temporary. I am expecting the US gov to continue injecting cash to support the weakened economy.

The demand surged because businesses switched their currencies to greenback to cover debts that are denominated in greenback?

"To push down long-term interest rates. The reduction in long-term interest rates, in turn, is meant to stimulate investment and other forms of spending."

3 Things I Learned from the Coronavirus Crash (blog post by Ofdollarsanddata)

"Another useful thing that has come out of this crash is the realization that lots of “safe havens” aren’t actually safe."

"And that, my friends, is why the only safe asset that I know of is the one that sits directly between your ears."
15 March, 2020

The circuit breaker has kicked in three times in the past week as investors exited the market with the coronavirus outbreak disrupting global supply chains and fueling fears of a recession. The stock market has tumbled into a bear market, or down more than 20% from their recent highs.

The rules, which apply to the US market (regular trading hours only), are as follows:

Level 1: If the S&P 500 drops 7%, trading will pause for 15 minutes.
Level 2: If the S&P 500 declines 13%, trading will again pause for 15 minutes if the drop occurs on or before 3:25 p.m. ET.
Level 3: If the S&P 500 falls 20%, trading would halt for the remainder of the day. A Level 3 breach can be triggered at any time.

The Level 2 and 3 circuit breakers have never been triggered in their current form during regular trading hours. The prior circuit breaker system was revamped after it failed to prevent the May 2010 flash crash. The current set of breakers were put into effect in February 2013.

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