In a
surprising move, traders appear to be taking profit on the Dollar after the
latest US interest rate decision. This is benefiting many different emerging
market currencies in early Thursday trade. With exception of the Indonesian
Rupiah, Thai Baht and the New Taiwan Dollar, most emerging market currencies
across Asia are trading higher against the USD at time of writing. This
includes the Malaysian Ringgit, Chinese Yuan, Indian Rupee, Philippine Peso and
Korean Won.
Although
this would be seen as negative news for holders of emerging market currencies,
we are unsure how long this rebound in sentiment will last. It could be a
temporary move, largely encouraged by investors taking profit on a persistent
resurgence in the Dollar over the second quarter of 2018. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
After all, the Federal Reserve appeared significantly more upbeat than most
expected yesterday with markets even receiving a surprise by seeing two more US
interest rate increases before the end of the year in the dot plot forecast.
Federal Reserve Chair, Jerome Powell,
also appeared very optimistic about the current health of the US economy in his
comments.
The
combination of an improved fundamental outlook for the United States and an
adjustment higher in US interest rate expectations will probably encourage
investors to purchase the Dollar at lower levels.
Lira unable to
find buyers
As an
exception to the theme that there seems to be an improved appetite towards most
emerging market currencies in early Thursday trade, the Turkish Lira is still
suffering from a lack of buying appetite and is already down by another 0.5%
for the day. There are a number of different factors that are persistently
weighing on sentiment for the Lira, including worrying inflation and ongoing
concerns about the direction of the country in the lead up to the Turkish
general election on 24 June. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The
motivator behind the latest woes for the Lira is more likely than not traders
pricing in the broad concerns that President Recep Erdogan will undermine the
central bank if he is declared victorious in less than two weeks from now.
ECB next on
investor radar
While
this has already been a historic week and what many are proclaiming to be the
busiest week of the year for the financial markets it is not over yet, with the
latest meeting with the European Central Bank (ECB) set to conclude today.
It is
already considered a foregone conclusion that the ECB will be leaving monetary
policy unchanged today, although many investors are hoping for guidance on its
plan to exit quantitative easing.
With
the financial markets now appearing much calmer around the recent political
uncertainty in Italy, we find the Euro attractive at its current levels and it
could receive a bid today if the ECB offers any insight about exiting QE.
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