#capital-flows

#capital-flows

A simple strategy of borrowing in low-yielding currencies like the Japanese yen or the Swiss franc and putting your money in dollars looks set to beat the implied returns on markets such as European stocks and Chinese government bonds once the volatility of these assets is taken into account, according to Bloomberg calculations. That suggests the dollar will maintain its critical position in global portfolios, despite worries about its future this year as President Donald Trump shook up the global economic order.

Luis Toto Caputo, 60, has an unmatched ability to raise money in turbulent waters. The Argentine economy minister eliminated the export tax on grains earlier last week, and in just three days, $7 billion flowed into the country. Last Wednesday, U.S. Treasury Secretary Scott Bessent announced that the White House is negotiating a $20 billion aid package for Argentina. The financial storm that threatened to wipe out the peso and Argentine bonds subsided. The national currency appreciated again, and bonds regained ground.

At present, the fundamental backdrop remains fairly favourable as the U.S. labour market has cooled, helping yields and the U.S. dollar ease, thereby partially relieving discount pressure on equity valuations, especially for interest-rate-sensitive groups. However, part of the rate-cut expectations has already been priced in, so the index's positive reaction tends to be selective and depends heavily on upcoming data as well as the message at the FOMC meeting.