EM Asia Currencies Rebound

By Patturaja  Murugaboopathy 
    Nov 7 (Reuters) - Emerging Asian currencies rebounded on
Tuesday as a dollar rally lost some steam on lower U.S. Treasury
yields and investors were sceptical that the U.S. Congress will
quickly pass a major tax bill.
  However, investors were wary of a possible escalation in
political tensions that could affect the won and other regional
currencies, with U.S. President Donald Trump visiting South
Korea on Tuesday.
    Trump is on a 12-day tour in Asia, covering five Asian
countries, to discuss trade policies and North Korea.
    Given tensions over North Korea, the dollar-yen should
remain a bit weak this week despite the Bank of Japan's doggedly
dovish efforts to weaken the yen, Stephen Innes, head of trading
in Asia-Pacific for Oanda in Singapore, said in a report.

Reuters

 

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RBA : Don’t rock the boat baby

RBA: Don’t rock the boat baby
The RBA proved yet again to be one of more predictable  G-10 Central Banks offering up standard fare of no rate cut with no serious attempt to adjust forward guidance. Given the growing ASX momentum lifted by gains in local miners on the back of surging commodity prices, the Aussie dollar bears may be better-served waiting for Fridays Statement of Monterey Policy. And specifically, the RBA’s possibly revamped  CPI projections given the tepid Q3 CPI data, which continues to track below the lower end of the RBA’s 2-3 % inflation band.  But to be honest anything other than the glass half full approach from the RBA would be a surprise at this stage.
The Aussie initially moved higher  because some thought the RBA would tack dovish, so bearish bets unwound

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DBS Q3 net profits collapse 23%

SINGAPORE: DBS reported a surprise 23 per cent year-on-year drop in its net profit for the third quarter, largely due to hefty provisions on its exposure to the oil and gas industries.

The bank, Southeast Asia’s largest lender, said on Monday (Nov 6) that net profit for the three months ended Sep 30 was S$822 million, down from S$1.07 billion in the same period last year.

Net allowances surged 87 per cent from S$436 million to S$815 million, with the bank classifying its remaining weak oil and gas support service exposures as non-performing assets.

DBS CEO Piyush Gupta said the move will “enable investors to return their focus to our operating performance and digital agenda”.

Mr Stephen Innes, head of trading (APAC) at OANDA, said the bank’s move to shift these provisions forward bodes well for the lender.

“It reassures the investors that the bank is moving back towards its primary business, which is loans and commercial loans and making money of spreads. This is a positive move for DBS to get the bad loans off its book right now. The timing of this move is also good, that’s because one of the key things is that the lender’s stock is on a high right now so investors are not so negative on the stock.”

Profit before allowances was up 4 per cent to a record S$1.8 billion, propelled by loan and fee income growth and offsetting the impact of less favourable interest rates and trading income.

“Business momentum has been strong as we continued to capture opportunities in a reflationary environment across the markets we operate in,” Mr Gupta said.

Channel News Asia

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Ringgit higher on surging oil prices

KUALA LUMPUR, Nov 7 ― The ringgit opened higher against the US dollar today on increased demand, buoyed by rising crude oil prices, said a dealer.

At 9.10am, the local unit traded at 4.2235/2265 against the greenback from 4.2300/2330 yesterday.

OANDA Head of Trading Asia-Pacific Stephen Innes said despite the escalation of regional geopolitical tensions on the back of US President Donald Trump’s Asia tour,  the Organisation of Petroleum Exporting Countries (Opec)-inspired oil price rally underpinned sentiment for the ringgit.

He said with Opec likely to favour a deal extension to cut oil supply, at a meeting on Nov 30, this would also see the ringgit appreciating further.

“However, anything short of a deal extension could cause a sharp sell-off in oil prices. We expect the ringgit to stay at the current range until more Opec details are forthcoming.

“If we add the definite macro overlay and Malaysia’s strengthening position in the global supply chain in terms of exports, the future looks bright for the domestic economy and the ringgit,” Innes told Bernama.

However, against a basket of major currencies, the ringgit was traded easier today.

It declined against the Singapore dollar to 3.1021/1061 from 3.0991/1029 on Monday and eased versus the yen to 3.7130/7159 from 3.7053/7089 yesterday.

The ringgit fell to 5.5623/5676 from 5.5421/5478 compared with the British pound yesterday but gained against the euro to 4.9039/9087 from 4.9072/9124,

The Malay Mail via Bernama

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Predictably Unpredictable

Predictably Unpredictable
Being predictably unpredictable is a lot more challenging than one think but this notion has been the mainstay on FX markets this year and holding a view beyond one shift is exceptionally challenging for even the most seasoned. Whether its the plentitude of noise from headline risk or the latest reversal of fortunes from global central bankers, there’s certainly no shortage of conflicting drivers in this topsy-turvy world of currency trading.

Still, we have plenty of noise to consume today whether its the tax reform cacophony, central bank musing or a possible escalation in NK geopolitical tension, the air is thick with tension and currency markets are on the move in the early trade as traders evaluate and reevaluate headline risk

With Dudley’s retirement, it’s out with the old and in with the new at the Fed. But overnight  Dudely was at his candid best outlining his best vision for the Fed going forward. While hinting at price level targeting, I think it’s safe to assume we should expect a new framework in the offing on how the Fed gauges this New Age Economy in 2018.

The Japanese Yen

Yesterday Kuroda inspired USDJPY rally was quickly snuffed out by a heavy dose of Trump protectionist rhetoric, and of course, the possible flare-up in geopolitical tension have some traders hedging their bets.

There was nothing new from Kuroda who reiterated his dovish rhetoric, but with dollar bulls looking for some apparent reason to buy dollars in the absence of domestic data this week the BoJ determined dovish tone fit the bill sending them off to the races.
But with concerns, as unlikely as they seem, that North Korea may provoke the US by launching a missile or testing a nuclear weapon during the next leg of Trumps Asia tour has put more than a few investors on edge. Even more so with an impressive US armada positioned in the western Pacific set to retaliate. And with Trump pledging ” Era To End Of ‘Strategic Patience’ Over N. Korea”, things could get messy quickly. Given the escalation of geopolitical tension, the USDJPY should remain a bit soggy this week despite the BOJ’s doggedly dovish efforts to weaken the JPY

The New Zealand Dollar

The New Zealand government released terms of the Reserve Act Review this morning. And the Kiwi bulls gasped a sigh of relief when the New Zealand Finance Minister stated there was no desire to have the NZD included in the RBNZ review. Predictably we’ve seen some hedges against this specific tail risk unwind as the minor NZD relief rally ensued. As far as other changes in the act, they appear to be more superficial and would do little more than bringing the RNBZ in line with other Central Banker Practices of having multiple decision makers, publication of minutes and the dual mandate. Overall this is positive for the NZD, but the air remains heavy with political uncertainty and traders are showing little appetite to chase the NZD higher in early trade.

The Australian Dollar

It’s tough being an Aussie bear and whatever price action expected pre RBA statement from those anticipating a dovish tweak to RBA policy is just not panning out. Commodity prices are ramping higher, especially oil and iron ore and with ith the majority in the market apparently in the RBA’s steady as she goes camp, despite the dismal run of economic data, price action must be respected. But with most of Australia tuning into the Melbourne Cup perhaps the RBA is in little mood to dampen local festivities anyway.Back to the drawing board for the Aussie bears

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Asian Stocks Wobble as Trump’s Asia Trip in focus

Asian markets slipped on Monday as weaker-than-expected U.S. jobs figures dented sentiment. Investors were also keeping an eye on President Donald Trump’s visit to Asia, where he is expected to discuss North Korean nuclear issues with leaders in the region.

KEEPING SCORE: Japan’s Nikkei 225 was flat at 22,541.55, while South Korea’s Kospi dropped 0.9 percent to 2,536.27. Hong Kong’s Hang Seng index slumped 1.4 percent to 28,214.79 and the Shanghai Composite Index fell 0.3 percent to 3,361.21. Australia’s S&P/ASX 200 dipped 0.2 percent to 5,948.40. Stocks in Southeast Asia were mixed.

TRUMP IN TOKYO: Trump is on his first presidential visit to Asia this week with Japan as his first stop. In his remarks to business leaders in Japan’s capital, Trump emphasized that the U.S. has massive trade deficits with Japan and that he hopes to turn that around. He also said his decision to pull the U.S. out of the Trans-Pacific Partnership trade deal will prove “to be right.” Trump is due to visit South Korea, China, Vietnam and the Philippines in coming days. While denuclearizing North Korea is to top his agenda during the visits, trade and business issues will also be discussed.

ANALYST’S TAKE: “While we have very light U.S. economic diary this week, there will be no lack of political bluster as the U.S. tax reform debate rages while Trump deals with North Korean nuclear ambitions and regional trade relations during his whirlwind tour of Asia,” Stephen Innes, head of trading at OANDA, said in a daily commentary. “But make no mistake the focus is squarely on North Korea headlines.”

The Washington Post

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Ringgit lower in listless trade

KUALA LUMPUR: The ringgit opened lower against the US dollar today on lack of demand for the local note, dealers said.

At 9 am, the unit traded at 4.2400/2430 against the greenback from 4.2340/2370 on Friday.

OANDA Head of Trading Asia-Pacific Stephen Innes said the ringgit weathered the latest US interest rate sell off better that market expected.

He said the ringgit remained undervalued given the surprising levels of economic expansion which created a conducive environment.

“Positioning of the ringgit remains light. In the absence of an active non-deliverable forward (NDF) market and when regional currencies weakens, the ringgit is less likely to do so aggressively given the lack of NDF speculation pressure.

“While there is a need to add some much-needed reserves, perhaps with oil prices looking to move higher, Bank Negara Malaysia may be able to add to the reserve coffers at much lower levels than currently offered,” said Innes.

The benchmark Brent crude was trading 0.37% higher at US$62.30, (RM264.34) per barrel.

Meanwhile, the ringgit was traded mostly higher against a basket of major currencies.

It rose against the Singapore dollar to 3.1062/1087 from 3.1093/1122 on Friday and appreciated versus the yen to 3.7069/7105 from 3.7088/7128, previously.

The ringgit improved against the euro to 4.9205/9257 from 4.9309/9357 on Friday but fell to 5.5400/5452 from 5.5326/5382 compared with the British pound, previously. — Bernama

New Straits Times

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Danger from Downunder

Tax Reform -Tump – Asia

There is a very light  US economic diary this week,  but there will be no lack of political bluster as the US tax reform debate rages while  Trump deals with North Korean nuclear ambitions and regional trade relations during his whirlwind tour of Asia. But make no mistake the focus is squarely on North Korea headlines.

In a show of military might, an entourage of  F-35’s will accompany Trump( actually deployed to Okinawa), and the mainstay of the US Navy’s power projection, two more Aircraft Carriers will be positioned in the Western Pacific bring the total to three.

The Forex market’s reaction to last weeks tax announcement was underwhelming, but there remains  USD positivity as investors continue to reweight into US equities, but indeed, that tank is starting to dry up. There remains a lot of  puzzlement concerning some of the Houses latest amendments, but hopefully, some clarity is offered today

 Political Noise

NY Federal Reserve Governor Dudley is rumoured to be retiring in either spring or summer of 2018. His term was set to end in January 2019.

US political pundits will be paying close attention to the Virginia Governor race on Tuesday which appears to be a very tight contest between Democrat, Ralph Northam and Republican, Ed Gillespie, with many of the same issues as the presidential election likely to be top of the votes agenda.With President Trump approval ratings plummeting, markets will look for confirmation on the election front to validate the polling data.

Key for the USD 

For the dollar, to make significant headwinds, it’s in need of a heavy dose of interest rate support from economic data.But given the scarcity of such this week; the dollar may struggle to gain momentum without a helping hand from non-domestic influence. Critical levels of the UST 10’s   remain 2.30-2.40 where last week’s weeks topside breach of the Key 2.40 % level was fleeting and did not signal the critical breakout some had expected ( me included) On the downside a test of 2.30 could prove to be the dollar bull undoing.

The  Fear of the Fed is the key to a US dollar strength, and without a perceived acceleration of the Fed’s  rate-tightening schedule, we may top out on the dollar momentum until the next set of meaningful US economic data convinces.

Danger from Downunder

This week both the RBA and RBNZ policy meeting take centre stage and should offer up some significant volatility.

The Australian Dollar

The Australian Dollar remains vulnerable to RBA dovish guidance even more so post a dismal nationwide plummet in retails sales and weaker CPI. While the data suggests traders will continue to sour on the Aussie, but with the evidentiary erosion of the carry vs USD, it should lead to a clean extension for Australian dollar weakness from this point.

The New Zealand Dollar

The NZD is a bit more complicated given extended short positions established on local political noise.These shorts are incredibly vulnerable to a more hawkish RBNZ  bias than the market is forecasting.
Keep in mind traders have been selling Kiwi the better part of two weeks and my start to unwind positions ahead of the RBNZ. And while the  RBNZ could offer up some divergent( USD)  opportunity but given the possible short covering from overextended positions, best be nimble in this trade

However given this setup,  an excellent way to express AUD weakness is through NZD especially ahead of the RBNZ as there is a chance for a more hawkish bias than priced in at current spot levels.

The Euro 

The market remains very constructive on US assets, but 1.1575-1.1600 remains solid support. I suspect the market continues to play the ranges until something breaks.

The Chinese Yuan

The RMB has remained within a range of 6.45-6.65 of late However, following the 19th National Congress positivity and given the robust fundamentals we expect inflows to continue. Also, policymakers will open up domestic capital markets while adding more market reforms to attract foreign investment for some critical fiscal initiatives.

The Malaysian Ringgit

The Ringgit weathered the latest US interest sell off much better than the markets expected. A few things stand out in the Ringgit favour. The MYR remains undervalued on many models given the surprising levels of economic expansion which creating a considerable punch. But positioning in the MYR remains light, and the absence of an active NDF market, when regional currencies weaken the Ringgit is less likely to do so aggressively given the lack of NDF speculation pressure. And while there is a need to add some much-needed reserves, perhaps with OIL prices looking to move higher, the BNM  may be able to add to the reserve coffers at much lower levels than currently offered.

Oil Markets could play more influence 

WTI enjoyed a ceaseless move higher on Friday on the back of few if any headlines and while Baker Hughes Rig Count did fall by 1.1%, that came well after the meat of the rally kicked in.All in all, it appears support for OPEC to extend production cuts looks to be growing, and when factoring in the decline in US inventories and rig count, the bulls are smiling

But with the shale output effect not living up the skyscraping market’s expectation, OPEC may sense some weakness and may now be thinking 70 not 60 dollars per barrel;  before abandoning the agreement.But given a long way between now and November 30,  we anticipate either consolidation or a correction before a push higher to $ 60.00 on WTI.

Turkish Lira and South African Rand carry trades

Both the Lira and Rand came under dealers crosshairs on Friday

TRY 

The Lira was trading off the back foot after domestic core inflation hit the highest level in 13 years but cratered when headlines surfaced that President Erdogan has been accused of helping Iran avoid US/international sanction but.Given the tenuous USA-Turkey relationships this latest headline has carry trade investors running for cover once again

On the inflation front, with inflation touching 13 years higher there  little to no expectation the Central Bank will loosen monetary policy to spur the economy which saw the Lira fell nearly 1 %

ZAR

The Rand  weakness is likely to a combination of some moving parts, but the sell-off appears to be  more a function of credit rating jitters as the market is awaiting word from both S&P and Moody’s

Post NFP Market Action

While the NFP came below the market towering expectations, but with a +90k revision to Aug-Sept jobs, the data implies the hurricane influence was terrible, but not as bad as had  been reported, so this months rebound was less influential

However, wage growth came in dismally low, but with the hurricane’s distorting effects thought to be skewing the data, there should be no muss or any fuss from the Fed. And while the inflation watchdogs on the FOMC will fret but given the booming US economy, the Fed is pushing forward with December rate hike despite the skinny paychecks fully expecting that wages should respond to the strength in the other payroll headlines. Overall the markets didn’t read too much into weak October AHE growth, which should bounce back in November.

After the USD knee-jerk, astute traders bought dollar on the dip, and ISM non-manufacturing confirmed that fading the primary post-NFP USD weakness was the correct call. The robust print greenlighted a wave USD buying into the weekend, although in G10 ranges were respected.

To be honest, if you didn’t know there was an NFP release on Friday, you might have missed it as price action was neither USD hostile or supportive.

Jay Powell

Munchin finally got his man convincing Trump that continuity and stability at the Fed helm were essential and Jay Powell appointment suggests just that. Powell will not deviate too far from current Fed policy stance while supporting Tumps self-proclaimed stance of being a ” low-interest rate person.” And while his appointment proved to be anticlimactic market chatter was picking up on Friday debating not only the makeup of the new FOMC board but who will be the essential Vice Fed Chair as that post is now the high unknown

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The USD dollar comes back from the NFP wobble

Post NFP
While the NFP came below the market towering expectations, but with a +90k revision to Aug-Sept jobs, the data implies the hurricane influence was bad, but not as had been reported, so this months  print was less influential

However, wage growth came in dismally low, but with the hurricane’s distorting effects thought to be skewing the data, there should be no muss or any fuss from the Fed. And while the” inflationista’s” on the FOMC will fret but given the booming US economy, the Fed is pushing forward with December rate hike despite the skinny paychecks expecting an eventual bounce on wages due to the strength in the other payroll headlines.

After the USD knee-jerk, astute traders bought dollar on the dip, and ISM non-manufacturing confirmed that fading the primary post-NFP USD weakness was the correct call. The index has come in at 60.1 for October vs 58.5 expected and all but greenlighted a wave USD buying into the weekend.

Jay Powell
Munchin got his man convincing Trump that continuity and stability at the Fed helm were essential and Jay Powell appointment suggests just that. The presumption is he will not deviate too far from current Fed policy trajectory  while supporting Trump’s self-proclaimed stance of being a ” low-interest rate person.”

Tax Reform -Trump – Asia

While a relatively light US economic diary next week, there will be no lack of political bluster as the tax reform debate rages on while Trump will be dealing with North Korea nuclear ambitions and regional trade wars during his Asia tour. In a  show of US  military might, an entourage of F-35’s  will accompany Trump( actually deployed to Okinawa), and the mainstay of the US Navy’s power projection, two more Aircraft Carriers will be positioned in the Western Pacific bringing the unprecedented regional total to three.

Danger Downunder

Next week both the RBA and RBNZ policy meeting take centre stage

The Aud remains vulnerable to RBA dovish guidance even more so post a dismal nationwide plummet in retails sales. The market should continue sour on Aussie trade.

The NZD is a bit more complicated given extended short positions established on local political noise suggesting these trades are incredibly vulnerable to a more hawkish RBNZ  bias than the market is forecasting.
The market has been selling Kiwi the better part of two weeks and my start to unwind shorts ahead of the RBNZ

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Dollar steadies ahead of NFP

SINGAPORE (Reuters) – The dollar held steady versus a basket of currencies on Friday, as focus shifted to U.S. jobs data, with President Donald Trump’s nomination of Federal Reserve Governor Jerome Powell to be the next Fed chair coming as no surprise.

Trump on Thursday tapped Powell to lead the U.S. central bank, breaking with precedent by denying incumbent Janet Yellen a second term but signaling a continuation of her cautious monetary policies.

Trump’s decision was in line with what market participants had been expecting, and the dollar showed limited reaction after the news.

The dollar index last stood at 94.696 .DXY, having pulled up from a one-week low of 94.411 set on Thursday.

The greenback had slipped on Thursday after Republicans in the U.S. House of Representatives released proposals to overhaul the tax code.

Republicans called for slashing the corporate tax rate to 20 percent from 35 percent, cutting tax rates on companies’ foreign profits and on individuals and families. Congressional passage of the legislation, however, was far from certain.

While the contents of the tax reforms seem positive for the dollar, there is still uncertainty over how quickly it can be implemented, said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.

“This could be quite a drawn out process,” Innes said, adding that U.S. jobs data due later on Friday, would be a near-term focus for the dollar.

Against the yen, the dollar eased 0.1 percent to 113.94 yen JPY=, trading below a 3-1/2 month high of 114.45 yen that had been set last Friday. The euro held steady at $1.1659 EUR=.

Reuters

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