April 11, 2017

Issue#: 280/2017

Spot values at a glance:

USDSGD

USDCNH

AUDUSD

USDJPY

USDCAD

GBPUSD

Daily Observations:

Asian stocks were broadly lower, as safe haven assets such as Treasuries, the Japanese yen and gold climbed, amid increasing geopolitical tensions in Syria and North Korea. Oil held onto overnight gains, and looks poised to extend its longest winning streak since December. Fed Chair Janet Yellen confirmed that the central bank has shifted to a more neutral stance, one of sustaining economic gains instead of post-crisis healing.

US:

  • Fed Reserve Chair Janet Yellen emphasized that the US economy no longer needs a large amount of monetary stimulus, justifying the central bank’s move to a more neutral stance. She added that inflation was “slightly below” the Fed’s objective, but that the unemployment rate was also below levels some monetary policymakers believe is consistent with full employment.
  • Markets remained muted to Yellen’s comments; Fed funds futures pricing data on Bloomberg continue to reflect a 63% probability of a June rate-hike.
  • The White House’s press secretary Sean Spicer warned Syria to stop using barrel bombs against civilians, suggesting President Donald Trump may expand the criteria for action against Bashar al-Assad’s regime after last week’s missile attack on a Syrian airbase. South Korean assets have sold off amid speculation the US could make a similarly aggressive pivot when it comes to North Korea.
  • The US dollar weakened amid increased geopolitical tensions in the Middle East and North Asia, with the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, declining 0.1% in New York.
  • US Treasuries gained following increased safe haven asset demand; the benchmark 10yr Treasury yield declined 3bps to 2.34% earlier today.
  • US equities were largely unchanged, with the benchmark S&P 500 Index eking out a 0.1% gain; energy stocks were the main gainers.
  • Tesla Inc. has surpassed General Motors Co. to become America’s most valuable carmaker, after climbing 3.7% last night, boosting its market capitalization to about $51 billion.

France:

  • France’s presidential election is becoming a four-way contest as far-left candidate Jean-Luc Melenchon surges to catch Republican Francois Fillon, stoking uncertainty over the outcome less than 2 weeks before voting begins.

China:

  • According to Bloomberg Intelligence, China’s tighter restriction on moving money abroad, coupled with higher interest rates and stronger economic growth may have reversed 2 years of capital flight. A net inflow of about $23.9 billion was recorded in February, compared to a net outflow of $71.4 billion in the month prior. This may help explain the yuan’s stability this year.

Singapore:

  • According to Bloomberg Intelligence, the Monetary Authority of Singapore is likely to keep monetary policy unchanged this week as it waits for more evidence the eoncomy is gaining traction. The central bank may maintain its neutral stance of zero percent appreciation in the NEER (nominal effective exchange rate), and leave other policy settings, such as the center and width of the bank, unchanged. Inflation and growth have picked up and the outlook has improved since the MAS last convened in October but both are likely to remain well below trend this year.

Precious Metals:

  • Spot gold continues to remain above the $1,250/Oz handle, as geopolitical issues in Syria and North Korea support demand for haven assets. The precious metal was 0.4% higher earlier today at $1,257.20/Oz, and looks poised to retest the crucial resistance at its 200-day moving average.
  • Silver for immediate delivery reversed overnight declines to gain 0.5% higher this morning, as silver bulls make an attempt to reclaim the $18/Oz handle.

Oil

  • Crude oil futures expiring in May extended its rally further after closing 1.6% higher at $53.08/bbl last night, registering its longest winning streak since December.
  • US government data due later today is expected to show crude stockpiles fell by 1.5 million barrels last week. Elsewhere, Libya declared a force majeure at a key export terminal after its biggest field stopped producing just a week after it reopened.

USDSGD:

  • Spot 1.4058
  • USDSGD was largely unchanged earlier today, after the pair registered 8 consecutive sessions of gains.
  • A correction back to the 1.4000 handle may be in the offing, although over a longer-term perspective, the next resistance region to be tested is the 100-day moving average at 1.4200.

AUDUSD:

  • Spot 0.7499
  • AUDUSD pared previous day’s losses to revert back to the 0.7500 handle, on the back of slight US dollar weakness earlier today. Any Aussie dollar strength was capped though as iron ore declined for a third straight day.
  • The momentum remains strongly to the downside for the currency pair, as it remains on due course to test the next support at 0.7300.

 

USDCAD:

  • Spot 1.3330
  • USDCAD fell 0.6% to 1.3314, as crude oil’s rally continues to buoy the Canadian dollar.
  • Further support is expected around the 100-day moving average of 1.3288..
  • According to Bloomberg news, top currency forecasters are predicting the Canadian dollar to weaken in the coming months, driven by continued divergence in monetary policy between the nations’ central banks. The main consensus is that the loonie will weaken to 1.3500 to the US dollar over the coming 6 months.

USDCNH:

  • Spot 6.9092
  • The PBOC earlier strengthened its yuan fixing by 0.12%, to 6.9035 to the US dollar, from 6.9042 yesterday.
  • The central bank skipped the use of reverse-repurchase agreements for an 12th straight day, the longest run since it began daily open-market operations last year, as cash supply is seen to be improving as lenders are now more willing to lend.
  • USDCNH was little changed from its previous close of 6.9071.

USDJPY:

  • Spot 110.69
  • USDJPY declined 0.6% to 110.62 earlier amid increased demand for safe haven assets.
  • The pair has been trading within a tight range over the past 2 weeks; the resistance at 112 remains while the 110 level acts as a crucial support.

GBPUSD:

  • Spot 1.2420
  • GBPUSD advanced 0.2% to 1.2431, as sterling traders keep an eye out for UK inflation data later today.
  • Further bearish momentum is expected for the currency pair, with the 1.2200 support on the horizon.
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UEN: 201419754M

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