Wait and See
Markets extremely quiet today as it being the last day of the month (traditionally quiet as dealers try to preserve profits or move on to next month if trading has been bad), economic numbers (Personal Income -2.3,PCE Deflator 2.2,PCE Core 1.6) basically as expected, and a major snowstorm about to hit the east coast.
The bigger picture is that the dollar has grinded lower for a number of days now. No large moves rather a slow steady move. We continue to look to tomorrows rate decision in Australia. 25 basis points are expected. Pay close attention to the comments as it will give direction on future moves and likely direction on the currency.
Taiwan getting concerned
Taiwans central bank told overseas financial institutions it is concerned about foreign capital inflows amid the local currency’s recent gains this according to Bloomberg News. I think this adds to a continuing trend toward a stronger dollar (see previous posts) specifically against Asia.
Overnight very little occurred with the dollar. GDP came out this morning basically as expected (+3.8%). The market had little reaction to the news.
Australian Dollar…Buy the rumor sell the fact?
On Monday, the 28th of February, the RBA (Reserve Bank of Australia) will make a decision on interest rates. The market consensus is a hike in rates by 25 bps, this has been price into their Bank Bills (interest rate futures) and the currency has strengthened on this expectation (”Rumor”). Now if the RBA does indeed hike rates (”Fact”) then the market got what it wanted.
Well, then what? ……………SELL Mortimer SELL!!
I think you mortgage your house, dip into the retirement fund, make a withdrawal from the kids college fund (they don’t need to go college…the world needs truck drivers too!!) and sell as much Australian dollar as you can.
Sell: . 7840-70 …………..Buy back: .7750-70
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A Short Squeeze in the making…..
Emerging Markets currencies sold off hard as U.S. interest rates trended higher once again. With yields in the states on the rise there is less need to look elsewhere to earn a return. Stock markets around the world have been going higher. Therefore a need to buy currency to purchase the stocks has been the trend. Watch these stock markets closely. When they start to turn the exit door to buy dollars will be very small. I am looking for the dollar to do very well tonight. Specifically against Korea, Taiwan, New Zealand and Australia.
Weak Dollar a concern for Asia
Talk last night that policy makers from South Korea, Japan, China and other members of ASEAN met to discuss the weak dollar. Clearly the ever weakening dollar has been bothering this region. This is eveident from the continued smoothing (intervention) which takes place almost everyday in the market. This intervention is not aimed at changing the direction of the dollar but rather to slow the move. All this being said I look for dollar Asia to continue to weaken with Korea and Taiwan leading the way. 1000 in the Korea was already breached yesterday and I feel that we will be comfortably below that level early next week.
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