Yuan watch

Stephen Innes SPI Asset Management

The Pboc Yuan Reference Rate came in a 7.0725 vs 7.0727, not the clearest of signals that the Pboc will soon embark on a stronger Yuan policy. Before jumping to conclusions, we need to monitor the reference rates for the rest of the week and beyond. If a strong Yuan view holds any water with traders, look for moves to 7.10 to be faded as it's improbable, we are being led down the Yuan accord garden path on this one.

Todays Yuan setting could be all part and parcel to bridging the trust gap where both parties may deescalate on a very gradual basis.

Japanese Yen

Despite the tentative open in Asia, USDJPY remains supported on dips, but profit-taking did set in at the weekly cloud baseline at 108.43 which could be the pivot this week. But with the growing expectation of the BoJ easing monetary policy on Oct. 31 as a pre-emptive strike to ward off any possible Yen appreciation, dips could remain supported.

Singapore Dollar

The MAS slightly reduced the rate of appreciation of the SGDNEER policy band. It kept the centre and width of the trading band unchanged. The MAS decision seems priced in by the market, with USDSGD trading to a high of 1.3734 and coming off to 1.3675, before heading back to 1.3700.

But with the Yuan possibly veering on a positive track as part of Friday phase one US-China trade deal, its's unlikely the USDSGD will go screaming topside anytime soon unless, of course, we get a good dose of back peddling from Friday' apparently baby stepped currency trade accord.

But for the most part, traders have significantly reduced short Asia FX positions, especially in currencies strong correlated to the YUAN like KRW and SGD as a stronger Yuan is thought to be part of the phased-in US trade concessions.

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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