Forex Investment and Currency Trading

The SPX closed up slightly, erasing an early slide, spurred by hopes of better earnings news from the financial sector. Yesterday’s positive risk sentiment also pushed the dollar weaker and high yielding currencies broadly stronger. Treasuries gained though as the Fed continued on its treasury purchase program. Yields of 10y USTs fell 6bps to 2.86%.

This morning, however, price action for risky assets is somewhat softer with US equity futures trading on a negative undertone, the dollar strengthening, bund yields edging lower on the margin and high yielding currencies like the TRY and the ZAR a touch weaker. Interestingly, Asian high yielding EM currencies that have participated in the risk rally only lately, like the INR and the IDR, they are now outperforming their peers in the high yielding universe.

According to newswires, premier Wen Jiabao said that Chinese industrial production in March picked up to 8.3% yoy vs a very low 3.8% yoy previously. He also hinted that domestic demand indicators like fixed asset investment and consumption will also point towards a stable growth profile. The existing forecasts for China already assume a powerful recovery in sequential growth this year on the basis that china had more room to ease fiscal and monetary policy than other economies. The combination of Wen’s statement and the strong lending growth data provide growing evidence that policy initiatives are helping the Chinese economy recover. This should support pro-cyclical trade recommendations, such as long AUDJPY tactical trade.