Dollar strength: Boon or Bane AND More.....

1. Dollar dominance is pushing downward pressure on the central bank assets, and this puts their monetary policy in jeopardy as now they are dealing with depreciating currency and higher inflation in times when it's tough to service their USD debt. Japan’s foreign reserves dropped by a record $54bn to $1.24tn after authorities spent nearly $20bn last month to intervene in currency markets.

2. Although the rising clearing of derivatives protects the financial system of a potential collapse from the $12 trillion notional OTC derivative market, it exposes us to the liquidity risk from collateral postings and the PAI associated with it due from the CCPs. Furthermore, clearing adds more concentration risk in the hands of one single clearing house.

3. Credit Suisse has offered to buy back SFr3bn ($3bn) of its debt after a bruising week. They wanted to buy the bonds to rebalance their capital structure and optimize interest expense, buying back the securities at a rock bottom level.

4. Abnormal increase in money supply is one of the key reasons for inflation. Pandemic stimulus increased money supply at one of the fastest pace ever seen and now the Fed is reducing money supply at levels beyond the 2 standard deviations from average and that makes me think that very soon we should see downward surprises in inflation.

5. Elon Musk's decision to buy Twitter might again cause banks large losses on the loans advanced to chase the big dream. After competing heavily to fund the purchase, MS could finally lead the book, but is now struggling to sell the debt. Investors aren't willing to buy such risky debt given the current market conditions. Losses on twitter could cost MS more than a billion.

6. Dollar rise is also creating problems for the FMCG companies who bet on foreign sales. The DM currency weakness is in turn leading to the dollar rise, which implies that companies with high DM sales dependence can't even pass on the rise in prices to the consumers as typically DM inflation is expected to be low and hence consumers aren't willing to absorb the rate rise. This cycle is preventing companies from raising their prices and hence might have negative implications on the top line.

7. Interesting Charts: