- USD The dollar’s rally induced by a repatriation bid appears excessive, and look for a partial retracement in the coming weeks. However, stabilization in global equity markets may need to be seen first.
- EUR Expect EUR/USD to end 2008 around 1.3800, but the pair has yet to show significant signs of stabilization. Major support is seen at 1.2130, the 50% retracement of the 11/2000 to 7/2008 rally.
- JPY Japan’s modest policy steps alone are not likely to be sufficient to reverse JPY gains. Assuming some moderation of risk aversion arising from the financial crisis, expect a modest USD/JPY at year-end.
- GBP EUR/GBP hit a new record high last Friday of 0.8195. Expect those levels to be re-tested and broken as the BoE is forced to aggressively ease monetary policy to combat recession.
- CHF EUR/CHF recently posted a new record low of 1.4300 as the franc benefits from a safe haven bid during an environment of extreme equity weakness. This level now provides significant support.
- SEK The SEK outlook remains negative with weakening yield support and declining equity values. EUR/SEK will likely continue to take its cue from the OMX Swedish equity index.
- NOK EUR/NOK has declined rapidly as tensions have been reduced in the money markets. The next level of support is seen at 8.44, the 61.8% retracement of the surge from August 28 to October 22.
- CAD In the 3rd leg of USD strength (risk reduction), CAD has fared as badly as other commodity currencies. Yet, less “decoupling” from US should prevent CAD recovering much if risk reduction eases.
- AUD Trade weighted plunge puts AUD close to lows of some past cycles even though in net terms commodity prices still elevated. Looking for AUD to rebound more than some other G10 currencies.
- NZD Has lost ground versus neighboring AUD recently as RBNZ more willing to accept falling currency than RBA. Important 3Q jobs and wages data due next week.
- MXN Liquidity measures announced on Oct 27 are likely to improve liquidity and alleviate short-term MXN funding pressures allowing USD/MXN to drift back down below 13.00 in coming days.
- BRL COPOM to hike only 25bp hike on Oct 29 with the chance for unchanged rates. Central bank measures may eventually push USD/BRL lower, but short-term volatility to persist.
- COP Despite plethora of liquidity measures announced last week, USD/COP likely to continue to trade in line with global risk appetite and underperform other LatAm FX during bouts of volatility.
- CLP Oct 30 data to show slowing economic activity, but central bank on hold in 2008 amid persistently high inflation. USD/CLP susceptible to further upside from strong USD and lower commodity prices.
- CNY The authorities continued to display preference for a stable currency amid the financial turmoil. Other policy measures may help mitigate downside risks to domestic financial markets.
- KRW The authorities likely to introduce more measures after recent liquidity support package failed to calm markets. Narrowing rate differential to weigh on the KRW.
- IDR The authorities will buy back government bonds and ordered state firms to place their FX in onshore banks in the latest bid to quell further sell-off in Indonesian assets.
- INR RBI policy statement confirmed the shift in policy focus away from inflation. Ongoing market dislocation continues to weigh on the INR.
- HUF Strengthened substantially on the back of a 300bp surprise hike and an IMF program. If global sentiment improves, expect further downside in EUR/HUF, although the 260 mark could be hard to break.
- TRY TRY recovered from intra-week 1.70 high versus USD. Finance remains a concern and an IMF program is likely. Yet outperformance versus peer ZAR is likely to continue due to a better cash flow outlook.
- PLN Underperformed CE-3 on increasing cash flow concerns. ERM-II progress this week has not helped so far. We believe that PLN will soon catch up versus CZK, not least due to an imminent CNB rate cut.
- ZAR USD/ZAR briefly spiked to 12.0 but is likely to continue to move lower near term, with resistance around 10.0. FRAs still price sizeable rate cuts in 1H09 which we deem unlikely at these ZAR levels.
Currency Overview - October 28 2008
October 28th, 2008 · No Comments
Tags: Forex News
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