Asia wrap: Skating to where the puck is headed

Stephen Innes SPI Asset Management

Through the trade war lens, China's weakening economic indicators loom large over global markets, with today's startling 10% plunge in October's industrial profits starkly illustrating the severe challenges on the horizon. This downturn highlights the urgency of Beijing's stimulus measures and amplifies their importance through the trade war filter. Investors, already jittery, are keenly aware of the ripple effects such protracted disputes could have, particularly on the Chinese and European economies that are bracing for Trump's tariff onslaught.

Amid this turbulent backdrop, the Japanese yen has emerged as a beacon of stability, attracting a deluge of cross-currency safe-haven flows, espeically among those currencies whose economies are in the direct line of tariff fire. This might initially seem counterintuitive, given the yen's tight correlation with the yuan. Yet, it underscores the currency's allure in times of uncertainty, offering a prime " get in front of the hedge flows" opportunity for astute forex traders.

Furthermore, Scott Bessent's nomination as U.S. Treasury Secretary has injected a dose of calm into the US fiscal outlook, soothing the U.S. bond market. This serene fiscal climate has bolstered the yen, reinforcing its status as the go-to safe-haven currency and nudging the USD/JPY pair to near three-week lows as traders navigate the choppy waters of evolving geopolitical and economic landscapes.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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