Any further strengthening of the dollar (on Feb 1 the DXY was at 101.04) could be very destabilizing for commodities and to a lesser extent, equities.
From Slope of Hope, February 27:
The U.S. Dollar Index is pulling back today, but this is largely a Euro-driven move. One currency that isn’t joining is the Korean won. This might be nothing, but it’s worth keeping an eye on.
The won is highly sensitive to China and global trade. A bullish divergence in USDKRW would be significant. History is admittedly limited, but breaks above the green horizontal in the 1330 area have only occurred during explosive bull runs.
Also, the resistance line breached today was last broken to the upside in August 2022....
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And the yuan.
Down is stronger - after minimal initial reaction to Chinese PMI, the yuan has taken off:
The offshore yuan appreciated to around 6.9 per dollar, recovering further from two-month lows as stronger-than-expected domestic economic data supported market optimism over China’s recovery. Official and private survey data showed that China’s manufacturing sector expanded more than expected in February as Asia’s largest economy dismantled strict Covid curbs, while the country’s services sector also posted solid growth. On the monetary policy front, the People's Bank of China left its key lending rates unchanged for the sixth straight month at its February fixing, as widely expected. Globally, solid US economic data and hawkish remarks from US policymakers bolstered expectations the Federal Reserve would keep raising interest rates to tame inflation, keeping downward pressure on the yuan.
