Sitting on range-trade fence: complacent comfort

The past week has seen a short-lived flurry of market price action, with daily volatility in the US Dollar and equities edging higher on 30th April and again on 4th May. However, volatility overall has remained subdued, particularly in the benchmark US 10-year Treasury yield. Moreover, the Dollar NEER and US 10-year yields – increasingly a bellwether for financial markets

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Something has got to give

The Federal Reserve has in the past six weeks diligently stuck to its “patience until substantial further progress is seen” monetary policy mantra. Its “reward” has been range-bound US Treasury yields, a slowly depreciating Dollar and a metronomic rise in US equity indices, with all three financial markets exhibiting only modest volatility. Since 19th April the Dollar NEER has depreciated

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Dollar – Diversification, rotation and valuations

Media and analyst reports focussing on the scope for further US Dollar weakness and Emerging Market currency outperformance have continued to proliferate in the past month. The consensus view is still seemingly that a Democratic administration will fuel large US twin deficits and expectations of higher domestics inflation while Fed will keep rates on hold, eroding the value of Dollar

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Monthly currency seasonality: Down and out?

This report updates the monthly seasonal patterns of 31 major Nominal Effective Exchange Rates (NEERs) going back to January 2010, using over two million daily data points with trade-weights derived from the BIS (April 2019) and national central banks (see “Nominal Effective Exchange Rates: Monthly seasonal patterns”, 10 January 2019). A number of factors can drive currency seasonality, including underlying

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Forecast review: USD, CNY, EM & global growth

We concluded in Far more to Renminbi than USD/CNY cross (8th December 2020) that the risk was tilted towards the People’s Bank of China further weakening the Renminbi Nominal Effective Exchange Rate (NEER) in coming weeks given deflationary pressures. So far we have been proven broadly right, with the NEER down about 0.2% in the past fortnight while the month-on-month

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Far more to Renminbi than USD/CNY cross

The prevailing market view, as depicted in a recent Reuters article, is seemingly that Chinese policy makers are happy to allow further Renminbi appreciation versus the Dollar driven by a rising domestic trade surplus and strong capital account inflows. The Renminbi has indeed appreciated 2.2% versus the Dollar since our last report on 22nd October (PBoC likely to keep Renminbi

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Emerging Market currencies: Hopes and Realities

Media coverage of Emerging Market currencies tends to oscillate between the very bearish and very bullish, with little differentiation between low and high-yielding currencies or between regional blocks let alone between the dozens of currencies still referred to, rightly or wrongly, as “emerging”. Price action in 2019 only partially vindicates this approach. News articles about the November EM currency rally

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Nominal Effective Exchange Rate seasonality November & December update

This report updates the monthly seasonal patterns of 32 major Nominal Effective Exchange Rates (NEERs) going back to May 2010, using over 90,000 daily data points with trade-weights derived from the BIS (April 2019) and national central banks (see Nominal Effective Exchange Rates: Monthly seasonal patterns, 10 January 2019). A number of factors can drive currency seasonality, including underlying seasonal

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