Tag Archives: FX Trends

One might be forgiven for believing that nail-baiting start to the year is all China's fault.  It has repeatedly for eight sessions fixed the yuan lower, including earlier today, at a seemingly accelerating pace.  The new circuit breakers, introduced on Monday, appear to be adding to the volatility.  Chinese share trading was stopped today after the first hour with the CSI 300 off 7%.  It appears that the central bank through its agents intervened in the offshore (CNH) market.  The...

Chart 1 This Great Graphic is a favorite of mine.   Created on Bloomberg, it depicts the 2-year spread between Germany and the US on two-year money (white line) and the euro-dollar exchange rate (yellow line).  The chart covers the past five years. The scales of the two time series are different so it makes little sense to claim that euro gravitates toward the rate differential.  And there have been some significant misalignment, like in 2013 and into 2014.  However those periods seem...

Last year was the fourth consecutive year that the yen fell against the dollar.   However, what is obscured by this factoid is that over the past  six months, the yen has been the strongest of the major currencies, rising almost 3.2% against the US dollar. While some may be tempted to attribute the yen's strength to the dismal start of the year for equities, the fact of the matter is that the yen's strength began before this week.  Recall that 48 hours after the Fed hiked rates last...

Chinese shares and the yuan stabilized with the apparent help of the government's guiding hand, but global markets are still on the defensive.     The euro extended yesterday's decline through the $1.08 level.  The next immediate technical objective is near $1.0730.   The greenback is firmer against most major and emerging market currencies.  The chief exception is the Japanese yen.    Lower equity prices and the continued pullback in US yields are often associated with a stronger yen. ...

Many countries may look with envy upon Sweden.  Growth last year was probably around 3%, with household consumption rising a little more than 2%.   Its current account surplus is 7.5% of GDP.  Exports were up by 4.3%.  Its budget deficit is around 1% of GDP.    Earlier today Sweden reported its manufacturing PMI rose to 56.0 from 54.9 in November.  This the highest since March 2014.  The main angst of the Riksbank, Sweden's central bank, is the persistence of disinflationary conditions. ...

The knock-on effects of the meltdown in Chinese shares and the tension among major Middle East rivals are dominating the re-opening of the global capital markets after the New Year holiday.  The US dollar has recouped its earlier losses against the euro, sterling and the Swiss franc, and remains broadly higher against the Antipodean currencies.   The persistence of the yen's strength is the anomaly.  Since Christmas, the dollar has consistently traded below the trend line connect the...

(from my colleague Dr. Win Thin) Meet the new year - same as the old year.  EM starts 2016 on a weak footing, with negative sentiment carrying over from 2015.  The global backdrop remains poor, with the Fed likely to continue its tightening cycle with another hike in March.  Commodity prices remain near the lows, while China data suggests that the slowdown (albeit modest) continues. Idiosyncratic EM risk remains in play, but in some instances could take a bit of a breather.  Brazil’s...

The markets are in turmoil.   Global equity markets are sharply lower, dragging bond yields down.  The risk-off move has propelled the yen sharply higher.  Its 1.4% advance has seen the dollar slump to JPY118.70, its lowest level since-mid-October. The dollar is also weaker against the euro (~0.65%) and sterling (~0.25%).  However, the dollar-bloc has been dealt a blow.  The New Zealand dollar is off 1.6%, unwinding most of the gains seen in the second half of December.  The Australian...

The start of a new calendar year does not necessarily mean the rise of new market drivers.   In fact, the key issues investors face at the start of 2016 are the same that dominated Q4 2015.   These issues center around pace of Fed tightening, the outlook for the world's second largest economy and its markets, the impact from the drop in oil prices, and commodity prices more generally, Europe will deal with the centrifugal forces that threatening it, and whether Japanese economy can find...

The US dollar firmed against nearly all the major currencies in the last week of 2015.  The exceptions were the Antipodean currencies and the Japanese yen. The relatively high short-term yields offered Australia, and New Zealand may have attracted some hot flows looking park over the turn.  The yen's gains were all scored on New Year's Eve in thin turnover, as equity markets and US yields slipped lower. Since the ECB eased policy on December 2, the US Dollar Index has been mostly...