Key overnight events:
- The S&P 500 Index inched up, closing 0.1% higher and eking out its longest run of daily gains in 5 months amid speculation Chinese stimulus efforts will boost demand for natural resources.
- Iron ore jumped 19%, the most in 6 years, on talk of Chinese stimulus at the weekend National People’s Congress meeting, and on short covering.
- Brent oil broke above $40/bbl for the first time this year as Russia floated dates to discuss a freeze. Russian Energy Minister Novak said on state television that a meeting among major oil producers may be held in Russia, Doha or Vienna sometime between 20th Mar to 1st Apr. Meanwhile, WTI futures for April delivery reached a high of $38.11/bbl before closing 5.5% higher at $37.90/bbl.
- The Fed’s Fischer commented that we may be seeing first signs of higher inflation, while the usually-dovish Brainard stressed that downside risks remain and caution is required for further policy tightening.
- Japan 3Q GDP shrank at an annualized rate of 1.1%, beating estimates of a 1.5% contraction. The figure represented the second contraction in 3 quarters. Corporate investment grew 1.5% quarter-on-quarter, while consumer spending fell 0.9%.
- Spot 1.3845
- After reaching a key support the previous day, USDSGD has rebounded as much as 0.8% this morning to an intraday high of 1.3849.
- FX reserves fell 0.35% from US$244.86 billion a month ago, MAS said on its website.
- Spot 0.7428
- RBA Deputy Governor Philip Lowe reiterated that low wage growth and contained inflation provide scope for further rate cuts. He added that, like most of his global peers, he prefers a weaker currency.
- After reaching a high last night of 0.7485, the highest since July last year, AUDUSD has pared back some of its gains as it gravitates back towards the 0.7400 handle.
- Australia’s chief export, iron ore, has rallied 28% so far in March, spurring a similar surge in the Australian dollar, which has gained as much as 5% month-to-date.
- Spot 1.3329
- Oil’s recent recovery has spurred the strengthening of the Canadian dollar, as USDCAD sank last night to a 3-month-low of 1.3262, breaking the 200-day moving average briefly in the process.
- The Bank of Canada is expected to hold rates unchanged tomorrow night, with implied futures currently pricing in a 10.8% chance of a rate cut. The Canadian dollar has outperformed developed-country currencies since the last BoC meeting on 20th Jan; at that time, Poloz said he was reluctant to provide more stimulus partly due to accommodation from weak currency. USDCAD has dropped almost 10% since then.
- Spot 6.5122
- China’s FX reserves recorded a less-than-expected drop to US$3.20 trillion, higher than the US$3.19 trillion estimated, suggesting fears about cascading outflows from the second-largest economy may be overdone.
- China’s export slump deepened in February. Exports sank by 25.4% year-on-year in US terms, worse than the -14.5% expected and the -11.2% recorded in January. Imports fell as well, by 13.8% in US terms, over the same period, missing estimates of -12.0%. The result was a trade surplus of US$32.5 billion in February, down from US$63.3 billion in January.
- USDCNH continues to be supported at the 6.5000 handle, even after the PBOC raised its reference rate to the highest since 4th Jan.
- Spot 8.5011
- Industrial production came in unchanged month-on-month while manufacturing production declined by 1.0% over the same period.
- USDNOK remains well-supported above the 8.4000 – 8.4500 region.