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JPY

13 Oct 2023

Soaring yields support greenback, but move shows signs of exhaustion

Happy Friday. We see four key factors driving currency markets this morning: Safe haven assets are catching a bid as the conflict in the Middle East worsens, threatening to involve other regional powers. With Israel preparing for a ground offensive in Gaza and refugee flows into other counties set to increase, fears of wider disruption – which could lead to tighter sanctions on Iranian crude and ultimately slow flows through the Strait of Hormuz – are growing. Equity futures are pointing to a softer open, the euro and pound are sliding against the yen, Swiss franc, and dollar, and oil-linked...

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12 Oct 2023

MAS holds the line

At its 13 October policy review, the Monetary Authority of Singapore didn’t rock the boat, and in line with expectations maintained “the prevailing rate of appreciation” of the SGD NEER (i.e. 1.5%pa). The MAS also held the width of the trading band and level at which it is centered steady. In our view, maintaining the width of the SGD NEER band at 2% from the midpoint gives the MAS scope to support activity should the downside global growth risks flagged materialise (see below). Going forward the MAS is shifting to quarterly, rather than semi-annual, policy reviews in 2024. The next...

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12 Oct 2023

US CPI market conniption

• US CPI. The data caused a bit of a market conniption with US bond yields & the USD jumping up. This & negative risk sentiment weighed on the AUD.• Over-reaction? We think markets may have over-reacted. Rents boosted services prices, but more broadly there are signs progress is (slowly) being made.• Event radar. Since 2015 the AUD has only traded below current levels ~1% of the time. China trade & CPI, & the MAS meeting are in focus today. US CPI inflation was in focus overnight, and the result, even though it was very close to expectations, caused a...

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11 Oct 2023

US inflation in focus

• Mixed signals. Markets brushed off the hotter than expected headline US PPI, with the minutes of the last policy meeting reinforcing the Fed’s cautious stance.• USD volatility. Long-end US bond yields continue to fall as markets pare back further US Fed rate hike bets. The USD is near the bottom of its October range.• AUD holding. AUD whipped around a little overnight, but on net it is still tracking above ~$0.64 (~2% above recent lows). US inflation data released tonight. Markets were generally subdued overnight. The modest knee-jerk strength in the USD, lift in bond yields, and softness in...

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10 Oct 2023

A shift in the Fed’s tone?

• Positive tone. Cautious rhetoric from Fed officials is weighing on bond yields & the USD, & boosting risk sentiment despite the Middle East conflict.• AUD ticking up. The downshift in the USD & reports China is considering a new round of stimulus is helping the AUD. The RBA’s Kent speaks today.• US data. US PPI inflation released tonight, as are the minutes of the last Fed policy meeting. The important US CPI report is due tomorrow night. Risk sentiment has remained positive with markets taking a somewhat sanguine view about the implications of the Middle East events. Oil prices...

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