Asia Economist and CEO, Centennial Asia Advisors

Manu Bhaskaran

Asia Economist and CEO

Centennial Asia Advisors

At Centennial Asia Advisors, we tell it like it is. We have no vested interests, no need for a China wall, and no reason to skew our outlook any other way. With over 30 years experience covering Asia’s political economy, you can be sure our conclusions and analyses are based on the unadulterated facts. Through years of fine-tuning our research methodologies, we deliver a quality of macroeconomic analysis few other houses can match.

Centennial Asia Advisors is an independent research and advisory firm that works with governments, multilateral institutions, financial firms and leading MNCs.

Economic Policy and Strategic Advisors

Macroeconomics

<ul style="list-style-type: square;">
<li>The Monetary Authority of Singapore (MAS) is not likely to tighten policy. A series of one-off shocks has slowed global activity and increased uncertainty over the trajectory of its economy and the outlook for domestic inflation. The recent spike in COVID-19 infections and the resulting restrictions may have slowed the economy as well.</li>
<li>However, prospects for a recovery next year remain good. It is therefore likely that the MAS would want to signal that a tightening of policy is on the cards next year, probably in its April monetary policy statement.</li>
<li>Such a signal would probably cause the market to push up the value of the <a href="https://www.smartkarma.com/entities/sgd" target="_blank" data-smartkarma-citation="entities:22827:1" rel="noopener">SGD (USDSGD CURNCY)</a> in anticipation of next year’s move.</li>
</ul>


The Monetary Authority of Singapore (MAS) is not likely to tighten policy. A series of one-off shocks has slowed global activity and increased uncertainty over the trajectory of its economy and the outlook for domestic inflation. The recent spike in COVID-19 infections and the resulting restrictions may have slowed the economy as well.
However, prospects for a recovery next year remain good. It is therefore likely that the MAS would want to signal that a tightening of policy is on the cards next year, probably in its April monetary policy statement.
Such a signal would probably cause the market to push up the value of the SGD (USDSGD CURNCY) in anticipation of next year’s move.


Singapore MAS Decision Preview: Stronger SGD if Central Bank Signals Future Policy Turn

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Chart Partners

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Technical Analysis

We have been bullish/long the DXY from 89 and more recently from 92 with a target at 94.00-50 and the level to sell the USD and turn short the greenback. Early USD shorts touted in CAD and GBP.US 10yr rise to 1.50% call to support a final USD push into our sell zone. USD will also find a final bid on a secondary pullback in the US equity cycle (EM and Asia FX) in October.We see synergy with yield near 1.50% and a DXY top near 94.DXY bear divergence is maturing into a final drive to the 94+ zone. We want to sell the next USD push/new high.

We have been bullish/long the DXY from 89 and more recently from 92 with a target at 94.00-50 and the level to sell the USD and turn short the greenback. Early USD shorts touted in CAD and GBP.US 10yr rise to 1.50% call to support a final USD push into our sell zone. USD will also find a final bid on a secondary pullback in the US equity cycle (EM and Asia FX) in October.We see synergy with yield near 1.50% and a DXY top near 94.DXY bear divergence is maturing into a final drive to the 94+ zone. We want to sell the next USD push/new high.

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.

FX & Rates

In the past couple of months governments in Asia-Pacific have materially accelerated the administration of Covid-19 vaccines.But because of low starting points, vaccination rates remain low compared to the EU, US and UK and even a number EM economies (including Turkey). The exceptions are Korea, Malaysia and Japan which have now administered a similar number of doses per capita as the US, while Singapore has pulled further ahead. In countries where governments started to vaccinate early such as the US and in particular the UK, vaccine roll-outs have slowed materially in the past nine weeks. These countries are taking additional measures to encourage those not yet vaccinated to do so and there is talk of jabs for under-18s and of booster jabs at least for the most vulnerable.The picture for the increase in Covid-19 deaths since early July is even more granular. In countries where governments started vaccinating early and now have high rates of vaccination, including the UK, US and EU, the number of deaths has perhaps unsurprisingly increased only marginally. The rate of increase and total number of deaths remain negligible in New Zealand despite a sill modest vaccination roll-out. It has to varying degrees been a similar situation in Australia, Korea, Japan, Singapore and Taiwan.The increase in deaths has also been modest in India and Philippines, albeit from a higher starting point. The increase in deaths has been far higher in Indonesia, Malaysia and in particular Thailand.  Vaccination rates are a critical variable from a health and economic perspective but their direct impact on currencies has been mixed.New Zealand Dollar has outperformed but is not particularly expensive in our view. Going forward we would expect it to remain well supported even if still vulnerable to pull-backs.

In the past couple of months governments in Asia-Pacific have materially accelerated the administration of Covid-19 vaccines.But because of low starting points, vaccination rates remain low compared to the EU, US and UK and even a number EM economies (including Turkey). The exceptions are Korea, Malaysia and Japan which have now administered a similar number of doses per capita as the US, while Singapore has pulled further ahead. In countries where governments started to vaccinate early such as the US and in particular the UK, vaccine roll-outs have slowed materially in the past nine weeks. These countries are taking additional measures to encourage those not yet vaccinated to do so and there is talk of jabs for under-18s and of booster jabs at least for the most vulnerable.The picture for the increase in Covid-19 deaths since early July is even more granular. In countries where governments started vaccinating early and now have high rates of vaccination, including the UK, US and EU, the number of deaths has perhaps unsurprisingly increased only marginally. The rate of increase and total number of deaths remain negligible in New Zealand despite a sill modest vaccination roll-out. It has to varying degrees been a similar situation in Australia, Korea, Japan, Singapore and Taiwan.The increase in deaths has also been modest in India and Philippines, albeit from a higher starting point. The increase in deaths has been far higher in Indonesia, Malaysia and in particular Thailand.  Vaccination rates are a critical variable from a health and economic perspective but their direct impact on currencies has been mixed.New Zealand Dollar has outperformed but is not particularly expensive in our view. Going forward we would expect it to remain well supported even if still vulnerable to pull-backs.

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

As a group, Asian currencies have underperformed the broad EM complex this year. Several factors are behind this underperformance: delay in the economic recovery due to the slow pace of vaccination, differences in monetary policy stances with much of the rest of EM already raising rates, and aggressive FX interventions. With these factors still broadly applicable, we see no reason for Asian currencies to outperform in the near term. Instead, we find differentiation among countries in Asia providing relative-value opportunities.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

As a group, Asian currencies have underperformed the broad EM complex this year. Several factors are behind this underperformance: delay in the economic recovery due to the slow pace of vaccination, differences in monetary policy stances with much of the rest of EM already raising rates, and aggressive FX interventions. With these factors still broadly applicable, we see no reason for Asian currencies to outperform in the near term. Instead, we find differentiation among countries in Asia providing relative-value opportunities.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Will Asian Currencies Continue to Underperform?

We are not expecting the FOMC meeting tomorrow to be market-moving. Having said that, with the (negative) correlation between the US dollar and EM currencies the highest since 2012, any implications for the dollar from the meeting tomorrow would ripple through EM currencies. This impact is likely to get exacerbated by the rising correlations within the EM FX universe, which implies that we are currently in a "risk-on/risk-off" period.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

We are not expecting the FOMC meeting tomorrow to be market-moving. Having said that, with the (negative) correlation between the US dollar and EM currencies the highest since 2012, any implications for the dollar from the meeting tomorrow would ripple through EM currencies. This impact is likely to get exacerbated by the rising correlations within the EM FX universe, which implies that we are currently in a "risk-on/risk-off" period.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Cross-Correlations Between EM Currencies Rise Sharply

Singapore

The Singapore dollar is the official currency of the Republic of Singapore. 

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SGD (USDSGD CURNCY)

Singapore MAS Decision Preview: Stronger SGD if Central Bank Signals Future Policy Turn

The MAS is not likely to tighten policy in October. More likely than not, the central bank would want to signal a tightening of policy next year,...

Manu Bhaskaran

USD DXY 94 Sell Target

We have been bullish/long the DXY from 89 and more recently from 92 with a target at 94.00-50 and the level to sell the USD and turn short the...

Thomas Schroeder

Vaccination and Currency Immunity

Vaccination rates matter but for some Asia-Pacific countries, economies and currencies they are not proving to be a panacea.

Olivier Desbarres

FX Dashboard: Will Asian Currencies Continue to Underperform?

Asian currencies have underperformed and are likely to continue doing so because of the impact on growth and monetary policy from the low...

Gautam Jain, PhD, CFA

FX Dashboard: Cross-Correlations Between EM Currencies Rise Sharply

While we are not expecting the FOMC meeting tomorrow to be market-moving, we need to watch for any impact on the dollar as it would ripple through...

Gautam Jain, PhD, CFA

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