Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

FX & Rates

As we see yields slip this week, especially over the past 24 hours, the question now is whether there is more to this move or is it already over?Technically we have clear levels and points of reference to watch.From a cross market perspective, there are more doubts than answers at this stage…

As we see yields slip this week, especially over the past 24 hours, the question now is whether there is more to this move or is it already over?Technically we have clear levels and points of reference to watch.From a cross market perspective, there are more doubts than answers at this stage…

Thematic (Sector/Industry)

As a lot of focus is placed on broad equity indices like the S&amp;P 500 and Nasdaq 100 as well as bond yields, one of the more fascinating markets beneath the surface is that of HousingThe latest developments from the US confirm earlier indications that a bull market is well set in Housing. The March close is a clear indication that higher prices will be seen in both short and medium term horizons.

As a lot of focus is placed on broad equity indices like the S&amp;P 500 and Nasdaq 100 as well as bond yields, one of the more fascinating markets beneath the surface is that of HousingThe latest developments from the US confirm earlier indications that a bull market is well set in Housing. The March close is a clear indication that higher prices will be seen in both short and medium term horizons.

Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>A new currency regime in Asia?</li>
<li>Wildly inaccurate media reports wrongly suggest large-scale capital outflows from EM</li>
<li>Rather EM enjoying best forex reserve growth for a decade</li>
<li>
De facto Asian Currency Unit, a ‘Euro-like’ policy, allowing monetization</li>
<li>Loose US fiscal and monetary policies are more likely to spill-over into EM</li>
</ul>


A new currency regime in Asia?
Wildly inaccurate media reports wrongly suggest large-scale capital outflows from EM
Rather EM enjoying best forex reserve growth for a decade

De facto Asian Currency Unit, a ‘Euro-like’ policy, allowing monetization
Loose US fiscal and monetary policies are more likely to spill-over into EM


Could The New Asian ‘Euro’ Mean A Coming Decade of Outperformance From Emerging Markets?

Founder

Olivier Desbarres

Exacting. Excellent. Exceeding. Exemplary.

4X Global Research

4X Global Research was founded in 2017 to provide institutional and corporate clients with the substantive research, high-quality analysis and thoughtful insight on Emerging and G20 economies and financial markets they need to make informed and timely decisions and gain an edge in their investments.

Non-Japan Asian (NJA) central banks’ foreign currency (FX) reserves have gradually increased since end-March 2020, arguably the peak in global risk aversion.We estimate that the aggregate US Dollar-value of FX reserves in China, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand increased by about $514bn or 10% in the eleven months to end-February 2021 to about $5.66 trillion. This was just $122bn short of all the all-time high recorded in June-2014.Adjusting for currency-valuation effects – the appreciation of other major reserve currencies versus the US Dollar – we estimate that these NJA central banks’ FX reserves increased by about $342bn or 6.4%. As a percentage of GDP, this increase amounted to about 1.5% for NJA, ranging from only 0.3% in China to nearly 28% in Singapore. While realised investment gains on these central banks’ holdings and other official transactions may have inflated this increase in FX reserves, it was at least partly the result of central banks’ intervention in the FX market (i.e. buying foreign currency), in our view. Importantly, NJA central banks rightly attach greater importance to their currencies’ more relevant Nominal Effective Exchange Rates (NEERs), when setting their exchange rate and interest rate policies, than to their currency’s bilateral exchange rates, in our view.In the past 11 months NJA central banks have continued to show an ability and willingness to both limit daily FX volatility and influence their NEERs’ medium-term directionality.FX reserve accumulation has either capped the pace of appreciation (CNY, IDR, KRW, THB, TWD) or contributed to (albeit modest in most cases) NEER depreciation (INR, MYR, PHP) with NJA central banks seemingly intent on maintaining export competitiveness and limiting imported deflation. The Singapore Dollar NEER was unchanged over this period.Of course the past and future performance of individual currencies is conditioned by both the magnitude of central bank FX intervention AND current account and capital account flows (and the underlying factors behind these policies and FX flows) – the topic of Part Two of this FIRMS report.

Non-Japan Asian (NJA) central banks’ foreign currency (FX) reserves have gradually increased since end-March 2020, arguably the peak in global risk aversion.We estimate that the aggregate US Dollar-value of FX reserves in China, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand increased by about $514bn or 10% in the eleven months to end-February 2021 to about $5.66 trillion. This was just $122bn short of all the all-time high recorded in June-2014.Adjusting for currency-valuation effects – the appreciation of other major reserve currencies versus the US Dollar – we estimate that these NJA central banks’ FX reserves increased by about $342bn or 6.4%. As a percentage of GDP, this increase amounted to about 1.5% for NJA, ranging from only 0.3% in China to nearly 28% in Singapore. While realised investment gains on these central banks’ holdings and other official transactions may have inflated this increase in FX reserves, it was at least partly the result of central banks’ intervention in the FX market (i.e. buying foreign currency), in our view. Importantly, NJA central banks rightly attach greater importance to their currencies’ more relevant Nominal Effective Exchange Rates (NEERs), when setting their exchange rate and interest rate policies, than to their currency’s bilateral exchange rates, in our view.In the past 11 months NJA central banks have continued to show an ability and willingness to both limit daily FX volatility and influence their NEERs’ medium-term directionality.FX reserve accumulation has either capped the pace of appreciation (CNY, IDR, KRW, THB, TWD) or contributed to (albeit modest in most cases) NEER depreciation (INR, MYR, PHP) with NJA central banks seemingly intent on maintaining export competitiveness and limiting imported deflation. The Singapore Dollar NEER was unchanged over this period.Of course the past and future performance of individual currencies is conditioned by both the magnitude of central bank FX intervention AND current account and capital account flows (and the underlying factors behind these policies and FX flows) – the topic of Part Two of this FIRMS report. 

Non-Japan Asia: NEERs and FX Intervention

Whichever commodity index we look at, there are decent long term levels that are now limiting gains. While a major trend change is unlikely, a near term meaningful correction down is certainly the risk. Consequently, commodity currencies are also vulnerable in the short term.This all lines up with indications that financial markets as a whole are going through a notable bump as we enter Q2.

Whichever commodity index we look at, there are decent long term levels that are now limiting gains. While a major trend change is unlikely, a near term meaningful correction down is certainly the risk. Consequently, commodity currencies are also vulnerable in the short term.This all lines up with indications that financial markets as a whole are going through a notable bump as we enter Q2.

United States

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EURO/US DOLLAR (EURUSD CURNCY)

Make or Break for Bonds

Is the move down in yields the start of something or is it already over? The levels identified and highlighted in this note will help

Shyam Devani

Housing on the March

One of the most interesting closes at the end of March was the one seen in Housing. It adds to the conviction that further gains will be seen.

Shyam Devani

Could The New Asian ‘Euro’ Mean A Coming Decade of Outperformance From Emerging Markets?

Asian cross-currency volatility is at its all-time low. A de facto Euro-like unit is forming. This could be hugely bullish for Emerging Markets

Michael J. Howell

Non-Japan Asia: NEERs and FX Intervention

Non-Japan Asian central banks have in past year intervened in FX market to cap FX volatility, protect export competitiveness and limit imported...

Olivier Desbarres

Commodity Currencies and Their Warnings

Every major commodities index is hitting key long term levels and showing signs of stalling. It is no surprise then that bearish indications and...

Shyam Devani

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