Good Morning!
v Shorting
US dollar remains but there are emerging signs that the selling pressure is
easing. The main driver of US dollar correction has been motivated by delayed
expectation in Fed fund rate hikes than a change in views of Europe’s outlook.
v The
10-year US Treasury is making new highs and is seen as a right time for US
dollar to pick up the gauntlet. US labour market has a good chance of hitting
full employment in next 6 months on average 270,000 jobs per month being added.
v The
sharp selloff in US Treasuries will provoke uneasiness in Asian markets that to
be reflected in local equities and option space. Players will become less
willing to warehouse risks in light of bigger run-up in Asian currencies and
weakening inter-currency correlation, which dropped to its lowest level in
nearly 10 years. Country-specific themes are developing.
v Watch
for Ringgit Malaysia’s 1-month volatility that is trading above its long term
average 7.6%. Historically, the currency has a depreciation tendency of an
average 7.0% over an average period of more than 2 months. The rise in
volatility makes it harder for businesses to put on medium term currency
positions.
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