The USD has rebounded as UST 2Y yields edge higher, with the DXY index recovering towards 101. The US BEA will announce its annual revisions to US GDP today, and its third estimate of Q2 GDP. Modest revisions to historical growth are not likely to impact the USD, with both the Fed and markets more focussed on the job market.
USD/CHF is consolidating around 85, and remains near its lowest level since 2011. CHF strength may be an important factor in SNB’s monetary policy decision today. The strong CHF has prompted Switzerland’s two largest business groups, Swissmem and the Federation of Swiss Watch Industry, to publicly urge SNB to curb CHF gains. Unlike other economies, Swiss inflation had also fallen sharply below target to 1.1% (y/y) in Aug. With analysts largely expecting the SNB to cut by just 25bps, the CHF could soften if the SNB decides to follow the Fed in enacting a 50bps rate cut.
USD/CNH has inched back to 7.03, after briefly testing below the psychological 7 level yesterday. Sentiment towards China has improved after policymakers announced a co-ordinated wave of stimulus, including a 20bps cut to the 7D reverse repo rate and 50bps cut in the RRR. While rate cuts should weigh on the RMB, this may be offset by equity inflows, with the CSI300 index having climbed by over 7% from two weeks ago. Still, China’s economic outlook remains fragile, and sustained RMB gains are acceptable only if regional currencies continue their appreciation against the USD. There could be more two-way flows in the RMB ahead of the National Day holidays.
USD/JPY had rebounded to mid-144 levels amid USD strength, and with BOJ not signalling the possibility of a near-term rate hike in its policy meeting last Friday, even as it upgrades the consumption outlook. BOJ’s patience is officially attributed to increased uncertainty over the US economic outlook, but it could also be due to domestic political uncertainty. Japan is preparing for the outcome of the LDP presidential election scheduled on 27 Sep, and a new Prime Minister from the very diverse slate of candidates. Meanwhile, Japan’s CPI inflation rose to 3.0% y/y in Aug (Sep: 2.8%), while the core-core measure also bumped up to 2.0% (Sep:1.9%). Underlying inflation still looks supportive of BOJ’s policy normalization.
Topic
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.