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28 Nov 2014
FX Market Snapshot - November – DBS
The DBS Research Team shares some final month-end thoughts on the G10 FX space, noting that the month of November was predominantly dominated by the weak Yen and by the strong dollar.
Key Quotes
“At face value, it appeared that a strong US dollar dominated the month of November. In our view, it was more of a case of a weak Japanese yen and weak euro spilling negatively into the other currencies.”
“November was a follow through from the Bank of Japan’s (BOJ) surprise decision on 31 October to implement its second round of quantitative and qualitative easing (QQE2).”
“Despite this, caution also set in that the yen and euro can continue its pace of depreciation indefinitely. After Japan reported a technical recession in 3Q14, PM Shinzo Abe called for snap election on 14 Dec and pushed the second sales tax hike to April 2017 from October 2015.”
“In the Eurozone, there is in¬dication that the ECB would not surprise with QE in December, a decision likely to be pushed out to 1Q next year.”
“On the other side of the equation, the DXY (USD) index was flat, between 87.18 and 88.44, in November despite an upward revision in US GDP growth to 3.9% (QoQ saar) from its advance estimate of 3.5% in 3Q14.”
“Fed hike expectations re¬ceded on lower global commodities. US inflation expectations fell below 3% for the second straight month in Nov14. Since 19 Nov, US 10Y bond yield retreated to 2.22% from 2.36%.”
“Instead of Fed hike expectations pushing the USD higher, nervousness emerged that a higher USD may end up delaying the Fed’s plan to normalize monetary policy.”
“In emerging markets, the Russian ruble continued to head lower with crude oil prices.”
“In Asia ex Japan, dampened prospects for the global economy weighed most on the ex¬port-led currencies such as the Korean won, Taiwan dollar, Singapore dollar and Malaysian ringgit.”
“By fixing its USD/CNY parity at its lowest level since March thereafter, China sent that signal that it was not joining Japan or the Eurozone in weakening its exchange rate via easier monetary policy.”
Key Quotes
“At face value, it appeared that a strong US dollar dominated the month of November. In our view, it was more of a case of a weak Japanese yen and weak euro spilling negatively into the other currencies.”
“November was a follow through from the Bank of Japan’s (BOJ) surprise decision on 31 October to implement its second round of quantitative and qualitative easing (QQE2).”
“Despite this, caution also set in that the yen and euro can continue its pace of depreciation indefinitely. After Japan reported a technical recession in 3Q14, PM Shinzo Abe called for snap election on 14 Dec and pushed the second sales tax hike to April 2017 from October 2015.”
“In the Eurozone, there is in¬dication that the ECB would not surprise with QE in December, a decision likely to be pushed out to 1Q next year.”
“On the other side of the equation, the DXY (USD) index was flat, between 87.18 and 88.44, in November despite an upward revision in US GDP growth to 3.9% (QoQ saar) from its advance estimate of 3.5% in 3Q14.”
“Fed hike expectations re¬ceded on lower global commodities. US inflation expectations fell below 3% for the second straight month in Nov14. Since 19 Nov, US 10Y bond yield retreated to 2.22% from 2.36%.”
“Instead of Fed hike expectations pushing the USD higher, nervousness emerged that a higher USD may end up delaying the Fed’s plan to normalize monetary policy.”
“In emerging markets, the Russian ruble continued to head lower with crude oil prices.”
“In Asia ex Japan, dampened prospects for the global economy weighed most on the ex¬port-led currencies such as the Korean won, Taiwan dollar, Singapore dollar and Malaysian ringgit.”
“By fixing its USD/CNY parity at its lowest level since March thereafter, China sent that signal that it was not joining Japan or the Eurozone in weakening its exchange rate via easier monetary policy.”