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13 Mar 2015
Asian FX rebound could be short lived – Westpac
FXStreet (Barcelona) - Jonathan Cavenagh of Westpac argues that that any bounce in Asian FX sentiment is likely to be short lived, as Asian currencies still look expensive relative to the DXY trend, hence any USD/Asia dips will likely be well supported.
Key Quotes
“Overall, we suspect next week’s FOMC meeting outcome will have to deliver quite a dovish outcome (relative to expectations) in order to see a meaningful pullback in the major USD/Asia pairs. Even then, with a number central banks facing sharp falls in FX reserves or looking to actively accumulate FX reserves, this will naturally tend to limit the downside in USD/Asia momentum.”
“This point is reinforced by the fact that net equity inflow momentum already sits at quite elevated levels.”
“Hence scope for a great deal of fresh upside in terms of short term portfolio inflows is likely to be fairly limited.”
“Such a backdrop should keep most USD/Asia pairs well supported on dips. The levels we will be watching across the major USD/Asia pairs is as follows:”
USD/SGD – 1.3750
USD/CNH – 6.2600
1 month USD/KRW – 1118/1119
1 month USD/TWD – 30.45/30.50
1 month USD/MYR – 3.6600/3.6700
1 month USD/IDR – 13175/13225
1 month USD/INR – 62.60/62.80
1 month USD/PHP – 44.10/20
USD/THB – 32.55/65”
“Only a break of these levels would cause a re-assessment of a more bullish USD outlook in our view.”
“On an intra-Asia basis we look for INR, PHP to outperform, given a firmer domestic backdrop in both economies, while CNY/CNH can also outperform given the Chinese authorities have returned to a more neutral USD/CNY fixing bias.”
Key Quotes
“Overall, we suspect next week’s FOMC meeting outcome will have to deliver quite a dovish outcome (relative to expectations) in order to see a meaningful pullback in the major USD/Asia pairs. Even then, with a number central banks facing sharp falls in FX reserves or looking to actively accumulate FX reserves, this will naturally tend to limit the downside in USD/Asia momentum.”
“This point is reinforced by the fact that net equity inflow momentum already sits at quite elevated levels.”
“Hence scope for a great deal of fresh upside in terms of short term portfolio inflows is likely to be fairly limited.”
“Such a backdrop should keep most USD/Asia pairs well supported on dips. The levels we will be watching across the major USD/Asia pairs is as follows:”
USD/SGD – 1.3750
USD/CNH – 6.2600
1 month USD/KRW – 1118/1119
1 month USD/TWD – 30.45/30.50
1 month USD/MYR – 3.6600/3.6700
1 month USD/IDR – 13175/13225
1 month USD/INR – 62.60/62.80
1 month USD/PHP – 44.10/20
USD/THB – 32.55/65”
“Only a break of these levels would cause a re-assessment of a more bullish USD outlook in our view.”
“On an intra-Asia basis we look for INR, PHP to outperform, given a firmer domestic backdrop in both economies, while CNY/CNH can also outperform given the Chinese authorities have returned to a more neutral USD/CNY fixing bias.”