Korea’s substantial current account surpluses have been fully recycled by capital account deficits
• Under-conversion of overseas FX receivables may be a source of KRW demand going forward
• Growth-inflation mix is broadly neutral for USD-KRW, b...
• We highlight increasing downside risks to USD-JPY in the near term; expect a pick-up in JPY volatility
• The Bank of Japan appears comfortably sidelined for now even as domestic data hits a soft patch
• We revise our short-term USD-JPY forecas...
Colombia’s strong local growth story and robust capital-inflow outlook underpins our bullish COP view
• We revise our end-Q2 USD-COP forecast to 1,900 (from 1,930) and keep end-Q3 at 1,870
• We stay Overweight the COP against the USD over both sho...
Broad USD weakness, technicals and positioning could support the THB further near-term
• Real-money funds are underweight Thai local markets; as they cover their shorts, THB could rally further
• Fundamentally, we like this trade and will look to...
• AUD-NZD looks set for a sharp corrective rebound as shifting terms of trade catch the market long NZD
• Most NZD good news is priced in; AUD shorts are vulnerable to the improving Australian trade balance
• We recommend buying AUD-NZD via 3M f...
• USD-PKR has rallied 10% to 99 since end-2013 on FX aid flows, improving sentiment
• However, fundamentals are weak - the trade deficit is widening, FX reserves are below comfort levels
• Short-term gains to persist; we forecast PKR at 98 by Ju...
PBoC doubles width of USD-CNY onshore trading band to +/-2% in a decisive step to boost FX volatility
Mild CNY appreciation is still likely medium-term, but the ‘one-way’ CNY trajectory is over
Leveraged funds: We still like long 1Y ATMF USD-CN...
AUD has remained surprisingly resilient despite the slide in CNY/CNH; we see three reasons for this
• AUD is more sensitive than CNY to China data surprises, while domestic factors turned more supportive
• Leveraged funds remain substantially shor...
Enthusiasm for reform leaves scope for disappointment, especially with bond positioning crowded
• The external environment is changing and the MXN is vulnerable to more US data misses
• Leveraged funds: We recommend buying 3M USD-MXN call spreads ...
The Chinese authorities are finally delivering on two-way variability in USD-CNY and USD-CNH
• This is aimed at changing CNY/CNH investment characteristics rather than signalling a new CNY trend
• We see two-way USD-CNY volatility, fix/spot conve...
Our SC IMM positioning model is showing a ‘Sell’ signal for GBP-CAD, pointing to a downside correction
• Canada’s fundamentals have improved; short-term factors are supporting the GBP, despite weaker data
• We are adding GBP-CAD shorts to the Stan...
We think the deterioration in the Canadian economy is now ‘in the price’ for USD-CAD, at least for now
• Canada’s macro backdrop has improved somewhat, while economic data from the US has softened
• We expect this to be a temporary USD-CAD correct...
We expect TWD underperformance to reverse on better China data and more stable capital flows
• TWD has so far lagged the KRW rebound, in the context of the USD pullback, but we look for catch-up
• We recommend selling SGD-TWD, looking for this cro...
We forecast USD-THB at 34.00 at end-Q2 on slowing growth, political deadlock
• Technicals are turning bullish for USD-THB again; our SCTF data indicates light positioning in USD-THB
• THB-US 10Y spread has fallen which according to our PCA analysi...
• We investigate volatility slopes for EUR-USD, GBP-USD, EUR-JPY and USD-JPY
• We find similar statistical profiles and mean-reverting properties across currency pairs
• We find that on average the volatility slopes considered for these pairs mean...
We revise our short-term AUD-USD forecasts higher on better data, a change in RBA stance, positioning
• We expect AUD-USD to remain range-bound in H2 with offsetting factors in play
• Leveraged funds: We recommend buying 1M AUD-USD call versus se...
Market turmoil has underpinned the USD and the upward slope in USD-CNY NDFs
• The USD-CNY 12M outright in the NDFs is some way above the USD in the 12M deliverable forwards
• We expect CNY appreciation to be extended in 2014; there may be scope f...
Time may be running short for EUR-USD to fall as underlying fundamentals grow increasingly balanced
• We remain committed USD bulls, however, so we still expect a EUR-USD move lower in H1
• Leveraged funds: We recommend buying 3M 25/10-delta EUR-U...
CNY and CNH start 2014 on a firm note amid favourable seasonals and persistent onshore net USD sales
• Q2 will likely bring a widening of the onshore trading band and more two-way volatility
• We revise down our USD-CNY and USD-CNH forecasts out ...
Malaysia’s exports and trade balance have turned a corner; Singapore’s manufacturing PMI is faltering
• SGD NEER is in the strong half of band; MYR-USD rates spread should provide some support for MYR
• Bond investors should raise FX hedge ratios ...
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The world economy is in transition. Global growth rates are picking up, but transition means elevated risks and volatility.
In terms of global implications, all eyes will be on the US and China, with the US normalising monetary policy and China rebalancing its economy.
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