As the U.S. dollar index briefly hit 100 points in trading yesterday, the open interest and trading volumes marked record lows amid hawkish expectations about the future course of the Fed’s monetary policy.
The Intercontinental Exchange (NYSE: ICE) reported today that during the trading session on Wednesday, March the 11th, the trading activity on the U.S. dollar index contracts marked two records.
The first milestone was in daily trading volumes, totaling 159,577, surpassing the previous record by almost 35%. In December 2014, the daily trading volumes on the U.S. dollar index totaled 118,608 contracts.
Capital flight Away from the Euro
As the expectations for a Fed interest rate hike creep higher in the aftermath of a series of positive job reports from the U.S., there is a growing interest in holding U.S. dollar index positions. The second milestone which the Intercontinental Exchange (NYSE: ICE) marked today was a record open interest in the ICE U.S. Dollar Index contract, standing at 158,884 contracts.
Daily swings of more than one percentage point in the euro against the U.S. dollar have become the norm, leading to higher foreign exchange trading volumes in March so far.
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The U.S. dollar index contract represents the greenback’s value against a basket of major currencies.
Meanwhile, the commodities unit of Deutsche Börse announced its gold holdings for the physical backing of the Xetra-Gold bond marking a new record high. The number spiked to 54.4 tonnes in March, which is higher by 9% since the beginning of the year.
Capital flight away from the euro accelerated ever since the announcement and introduction of the European Central Bank’s quantitative easing program earlier this year. Deutsche Börse Commodities holds a deposit of exactly one gram of gold for each bond. With the price of gold slumping against the U.S. dollar, since the beginning of the year, gold actually rallied 11% against the single European currency.
The current value of gold in custody at Deutsche Börse Commodities is approximately €1.9 billion.
The managing director of Deutsche Börse Commodities GmbH, Steffen Orben, said in a company announcement, “Xetra-Gold offers investors one of the most cost-effective possibilities to buy and trade physical gold. The margin between bid and sell price is usually a mere 0.1 percent. The current record in gold holdings shows that an increasing number of investors trust in Xetra-Gold as an integral part of their portfolio.”