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10 Dec 2014
Asian currencies relieved after USD retreat – DBS
FXStreet (Barcelona) - The DBS Research Team notes that USD retreated after reaching highest levels since March 2009 due to the sell-off in US stocks, relieving the Asian ex Japan currencies.
Key Quotes
“The DXY (USD) Index fell in last two trading days after hitting 89.550 on 8 Dec, its highest level since Mar 2009. The retreat was in line with the sell-off in US stocks where investors have become less complacent about the negative growth implications from weak commodities. The rush back into gold and the Japanese yen was viewed as a flight to safety.”
“After all, there is speculation that the Fed may remove “considerable time” from its FOMC statement at its policy meeting next week. Markets were mindful that US stocks corrected after the previous FOMC meetings on 31 Jul and 18 Sep.”
“US stocks rallied after the 30 Oct meeting because of the weak JPY pulling up the Nikkei. Assuming that Japan PM Shinzo Abe a new mandate from voters at the snap elections on 14 Dec, his cabinet will be pre-occupied with how to bring the economy out of its technical recession, and to provide a package to relieve households and small businesses hurt by the weak JPY.”
“The retreat in the USD was a welcome relief for Asia ex Japan currencies, but not a healthy one. The region is pro-growth and cannot ignore Asian stocks falling with their US counterparts. That said, the Koreans and other export-led Asian countries will still prefer a USD/JPY rate below than above 120. This should also take some of the pressure off the CNY and CNH which have been bucking the stronger fixings in its official parity rate.”
“On a positive note, America can see that the CNY is now a more market-determined exchange rate that is no longer sticky around its official rate and fluctuates more within its wider trading band.”
Key Quotes
“The DXY (USD) Index fell in last two trading days after hitting 89.550 on 8 Dec, its highest level since Mar 2009. The retreat was in line with the sell-off in US stocks where investors have become less complacent about the negative growth implications from weak commodities. The rush back into gold and the Japanese yen was viewed as a flight to safety.”
“After all, there is speculation that the Fed may remove “considerable time” from its FOMC statement at its policy meeting next week. Markets were mindful that US stocks corrected after the previous FOMC meetings on 31 Jul and 18 Sep.”
“US stocks rallied after the 30 Oct meeting because of the weak JPY pulling up the Nikkei. Assuming that Japan PM Shinzo Abe a new mandate from voters at the snap elections on 14 Dec, his cabinet will be pre-occupied with how to bring the economy out of its technical recession, and to provide a package to relieve households and small businesses hurt by the weak JPY.”
“The retreat in the USD was a welcome relief for Asia ex Japan currencies, but not a healthy one. The region is pro-growth and cannot ignore Asian stocks falling with their US counterparts. That said, the Koreans and other export-led Asian countries will still prefer a USD/JPY rate below than above 120. This should also take some of the pressure off the CNY and CNH which have been bucking the stronger fixings in its official parity rate.”
“On a positive note, America can see that the CNY is now a more market-determined exchange rate that is no longer sticky around its official rate and fluctuates more within its wider trading band.”