Asia FX Sees Some Relief As Dollar Retreats,Yen At 34-year Lows

Samantha Luan

Economic

Forex

Stocks

Summary:

Most Asian currencies rose slightly on Wednesday, as weakness in the dollar offered some relief to regional markets, although underperformance in the Japanese yen persisted despite fears of government intervention.

The greenback retreated further from recent five-month peaks this week on some soft purchasing managers index data. But persistent bets on higher-for-longer U.S. interest rates and anticipation of more key economic readings kept traders largely biased towards the dollar.

Yen weak as USDJPY heads towards 155

But the Japanese yen saw little relief from a softer dollar, with the USDJPY pair trading near 34-year highs and in sight of the 155 level.

The yen weakened even as a slew of Japanese officials warned of government intervention to support the beleaguered currency. Traders saw USDJPY at 155 as potentially attracting intervention by the government.

Weakness in the yen came ahead of a Bank of Japan meeting this Friday, where the central bank is expected to keep rates unchanged after a historic hike in March. But its outlook on inflation and economic growth will be closely watched.

Australian dollar rallies on hotter-than-expected inflation

The Australian dollar’s AUDUSD pair was among the best performers in Asia on Wednesday, up 0.5% at a nearly two-week high.

The currency shot up after consumer price index inflation read stronger than expected for the first quarter, pushing further above the Reserve Bank of Australia’s 2% to 3% annual target.

The reading gives the RBA more impetus to keep interest rates higher for longer, which bodes well for the Australian dollar.

Dollar steadies from overnight losses, GDP, inflation data awaited

The dollar index and dollar index futures moved little in Asian trade after falling sharply on Tuesday, as purchasing managers index data showed unexpected weakness in U.S. business activity.

But the dollar retained a bulk of its gains made so far in April, as traders priced out expectations of early interest rate cuts by the Federal Reserve.

More key U.S. economic cues are due this week, with first-quarter gross domestic product data due on Thursday, while PCE price index- the Fed’s preferred inflation gauge- is due on Friday. Both readings are widely expected to factor into the central bank’s outlook on interest rates.

Weakness in the dollar offered some relief to Asian currencies, although they were still nursing losses so far in April.

The Chinese yuan’s USDCNY pair steadied close to five-month highs, amid resurgent doubts over a recovery in Asia’s largest economy. But further weakness in the yuan was limited by signs of currency market intervention by the People’s Bank.

The South Korean won’s USDKRW pair fell 0.2%, while the Singapore dollar’s USDSGD pair fell 0.1%.

The Indian rupee’s USDINR pair moved further away from record highs hit last week, but still remained well above the 83 level.

Source:Investing

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Warren Takunda

Cryptocurrency

Economic

Bitcoin kept up pressure on key resistance into April 24 as research showed whales “buying the dip.” Bitcoin Whale 'FOMO' Hits as BTC Price Coils Below $67K Liquidity Zone_1

Bitcoin Whale 'FOMO' Hits as BTC Price Coils Below $67K Liquidity Zone_1

BTC/USD 1-hour chart.

Bitcoin whales seize the day

BTC price action circled $67,000 after a boost at the latest daily close, data from Cointelegraph Markets Pro and TradingView confirmed.

Still within a narrow range, bulls continued to grind away at nearby order book liquidity. Bitcoin Whale 'FOMO' Hits as BTC Price Coils Below $67K Liquidity Zone_2

Bitcoin Whale 'FOMO' Hits as BTC Price Coils Below $67K Liquidity Zone_2

BTC liquidation heatmap. Source: CoinGlass

According to current figures from monitoring resource CoinGlass, a bid wall of around $35 million on Binance was taken into the daily close, with the bulk of ask liquidity now sitting between $67,000 and $67,500.

A 1-Month view of the order book illustrates how dynamic changes in liquidity placement impact overall price action.

The NET effect of blocks of Bitcoin ask liquidity moving lower, and some blocks of bid liquidity moving higher tightens up the active trading range to roughly $62k - $68k.

”BTC/USDT order book liquidity for Binance with whale volumes. Source: Material Indicators/X

An accompanying chart additionally showed trading behavior among classes of Bitcoin whales.

Of interest is the $1-$10 million order category, which, in contrast to others, increased exposure through April.

This adds to existing findings from research firm Santiment, with new analysis now revealing “FOMO” on the part of wallets with a balance between 1,000 and 10,000 BTC ($66.7 million — $667 million).

“Bitcoin's key whale tier holding 1K-10K $BTC are supporting this rise, and have now accumulated 266K more $BTC since the start of 2024,” Santiment wrote in X commentary. This translates to an accumulation of 1.24% of the entire supply. The crowd is also showing a high degree of FOMO.

The class of whale under examination now owns more than a quarter of the BTC supply, heading for new record highs.

BTC price action sees "unsettling quietness"

The day prior, meanwhile, trading firm QCP Capital suggested that crypto markets could enjoy a final stretch of low volatility before a seismic shift takes hold.

In the latest edition of its “New York Color” market updates sent to Telegram channel subscribers, QCP described what it called “unsettling quietness.”

“BTC is right smack in the middle 60/73k range and BTC front-end vols have trickled down closer to 60%,” it wrote.

Just last week, we had the fourth BTC halving and the market was panicking over the outbreak of war in the Middle East (which has since de-escalated).

”Bitcoin spot ETF flows (screenshot). Source: Farside

Analysts referenced the reset in Bitcoin funding rates and a slow but steady return of interest to the United States’ spot Bitcoin exchange-traded funds (ETFs).

“Demand from TradFi continues to stream in albeit at a slower pace with BlackRock posting 70 consecutive days of inflows,” the update concluded.

“Is this the calm before the (bullish) storm?”

Source: Cointelegraph

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Data Interpretation

On April 24, local time, the German April IFO was released:

The Business Climate Index of Germany was 89.4 in April, higher than the expected 88.8 and the previous value of 87.9.

According to the latest IFO report, the main reason for the rise in the manufacturing index is that companies' expectations for the future have improved, but companies assessed their current economic situation as worse. Order books shrank further, and there is no prospect of increased production.

In the service sector, the business climate brightened noticeably. The improvement was particularly marked in the context of the current recession. However, companies' expectations for the future remained practically unchanged, and are still skeptical regarding the months ahead.

The index rose in trade as well. Business expectations improved markedly but remain pessimistic overall. Companies were somewhat less satisfied with their current business. This was driven primarily by the situation in wholesale; business improved sharply for retailers.

In construction, the business climate improved for the third time in a row. This was thanks to considerably less pessimistic expectations. Construction companies assessed their current situation as somewhat worse. Many companies reported a lack of orders.

German IFO Report for April

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Cohen

Central Bank

Economic

Commodity

Cryptocurrency

Forex

Bond

Stocks

Investors entered 2024 in jubilant mood, anticipating a whopping six interest rate cuts over the course of the year that would slash borrowing costs and fire up the next stage of the economic recovery.

Now, they're waking up to the fact that it's not going to happen, with markets now pricing in just two rate cuts. We may get none at all.

It's largely the fault of the US economy, which continues to boom, keeping inflation high. The rising oil price isn't helping.

The US Federal Reserve dare not cut in these conditions, with chairman Jerome Powell bemoaning a "lack of progress" towards its objectives.

The stock market boom has faded and investors are having a serious rethink. Here's what it means for the main asset classes – and your investments.

Stock markets

The S&P 500 made a flying start to 2024, hitting a record high of 5,264.85 on March 28. It's now back below 5,000, but still up 4.73 per cent year-to-date.

As well as the US economy, the Israel-Iran stand-off is also rattling investors. Share prices surge and plunge by the day, depending on the latest war talk.

Joshua Mahony, chief market analyst at Scope Markets, says both sides appear to be stepping back from war right now.

"This should hopefully remove the fears within equity and energy markets," he adds.

The prospect of higher interest rates for longer have raised concerns that the global economy could be heading for a downturn, says Fawad Razaqzada, market analyst at City Index and Forex.com.

"Manufacturing across Europe has remained weak for months, albeit the pace of the contraction has slowed," he adds. Investing in a World of Higher-For-Longer Interest Rates_1

Investing in a World of Higher-For-Longer Interest Rates_1

Everything rests on the oil price, says Jeremy Batstone-Carr, chief global economist at Raymond James.

The recent sell-off was driven by crude climbing above $90 a barrel, but it has since eased to around $85, similar to a year ago.

"The supply of oil on to world markets remains unrestricted. If the Middle East conflict escalated to the point where crude deliveries were impacted, that would be another thing altogether," Mr Batstone-Carr adds.

Outlook: If oil climbs past $100 and heads towards $150, hang on to your hats.

Bonds

2024 was supposed to be a big year for government bonds in general and US Treasuries in particular.

The theory was that falling interest rates would slash bond yields and drive bond prices up. Now, the opposite is happening.

Yields on two-year US Treasuries started the year at 4.23 per cent. By April 19, they have climbed to 4.97 per cent, a rise of 17.4 per cent. That's a huge leap in bond market terms.

It's bad news for those who bought bonds in the hope of making a capital gain when prices rose.

"Rising Treasury yields show that investors are coming round to the possibility that the Fed will opt to stand pat on policy throughout the remainder of the year," Mr Batstone-Carr says.

However, Swiss private bank Julius Baer has warned that the negativity may have been overdone and today's lower bond prices could be a buying opportunity.

Outlook: The great bond price rally may have to wait.

Cash

Skyrocketing interest rates may have been bad news for the economy, but they were terrific for savers, who finally got a decent return on their deposits after years of near-zero returns.

Many will have been dreading seeing rates fall this year, but 2024 hasn't been as painful as expected.

While long-term fixed rate bonds have fallen, as banks anticipate lower interest rates further down the line, easy access and two-year fixed rate savings bonds pay up to 5 per cent, says Savings Champion founder Anna Bowes.

"Five-year savings bonds have dipped below 4.5 per cent but may still tempt some," she adds.

Outlook: Cash is cooking for now.

Gold

Higher interest rates would normally spell bad news for gold, which doesn't pay interest, as investors can get higher yields on rival safe havens cash and bonds.

These are not normal times, says Ole Hansen, head of commodities strategy at Saxo Bank.

"The yellow metal continues to surprise traders and analysts, having surged more than 15 per cent this year at a time when dollar and bond yields have risen strongly, while expectations for rate cuts have slumped," he adds.

This is on top of last year's 13 per cent gain, but gold appears to have hit a ceiling at just below $2,400 an ounce, Mr Hansen says.

Conflict in Ukraine and the Middle East, central bank buying and rising debt in the major economies may continue to support the price.

"Fear of missing the rally creates a strong buy-on-dip mentality, too," he adds.

However, two failed attempts to climb above $2,400 "may signal a short-term top followed by an overdue period of consolidation, or perhaps even a correction", Mr Hansen cautions.

Carsten Menke, head of next generation research at Julius Baer, says gold's continued rally is a "head scratcher".

"We lift our price targets, but still see more downside than upside in the medium to longer term," he adds.

Outlook: Gold investors have had their fun and should calm down a little.

US dollar

Many expected the US dollar to fall in 2024 as US inflation eased and the Fed started cutting. Instead, it's up another 3.5 per cent against the euro and almost 10 per cent against the Japanese yen in 2024.

Like gold, investors see the world's reserve currency as a safe port in a storm, whether economic or political. So, the past month has been very good for the greenback.

Higher for longer applies to the US dollar too, says Mr Razaqzada.

"Escalation of geopolitical risks in the Middle East have only added to the US dollar's overall bullish tone."

Outlook: King dollar still rules (for now).

Bitcoin

This was supposed to be a blockbuster year for Bitcoin, as US regulatory approval of 11 spot-Bitcoin exchange-traded funds (ETFs) drove up demand, while April's "halving" event slashed the supply of new coins.

Unusually for crazy crypto, the story appeared to be going according to the script, with the price shooting above $70,000 to hit a new record high.

It then slumped to $61,000. It's back above $66,000, which still represents an increase of 50 per cent year-to-date.

James Sullivan, group general counsel at crypto exchange Bitstamp, says halvings happen every four years and history shows that Bitcoin's value tends to rise significantly in the months that follow.

The risk is that the halving has already been priced in.

"As any investor knows, markets do not follow rules or logic and nothing is certain, certainly in crypto," Mr Sullivan says.

Outlook: Crypto is still impossible to call, but increasingly difficult to ignore.

Source: The National News

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Remarks of Officials

On April 24 local time, Joachim Nagel, President of the Deutsche Bundesbank, delivered a speech, stating as follows.

At present, I am not fully convinced yet that inflation will actually return to (the 2 percent) target in a timely and sustained manner. Core inflation (excluding food and energy prices) remains high, especially inflation in the services sector. Driven by continued strong wage growth, it is more persistent than goods inflation.

By June, we will know a lot more, for example about wage growth in the first quarter. And this data will feed into new projections. If they help to increase our confidence in a timely and sustained return to 2 percent, I would be in favour of a rate cut in June.

However, such a step would not necessarily be followed by a series of rate cuts. Given the current uncertainty, we cannot pre-commit to a particular rate path.

The Governing Council will continue to decide – meeting by meeting and based on incoming data – how we proceed.

Speech by Nagel

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Ukadike Micheal

Economic

Commodity

As Chinese private oil refiners gear up for anticipated US sanctions on Iranian oil exports, they may resort to purchasing cargoes with obscured origins to ensure a steady flow of crude to the world's top importer. The US House of Representatives recently passed tougher measures against Iran, extending restrictions to foreign ports, vessels, and refineries involved in the Iranian oil trade. Despite these measures, Iran's exports to China are expected to continue, with private refiners, known as teapot refiners, already preparing for increased scrutiny.

Teapot refiners, predominantly located in Shandong province, have been key beneficiaries of US sanctions on Iranian exports. They are exploring strategies such as purchasing manipulated oil shipments, often facilitated through ship-to-ship transfers in regions like Malaysia and Singapore, to mitigate the impact of sanctions. However, some refiners may exercise caution, as profit margins are already under pressure, with breakeven levels being barely sustained.

The use of alternative measures, including yuan transactions and domestic clearing systems, has enabled Chinese refiners to bypass US sanctions and continue importing Iranian oil. Despite official Chinese customs data indicating no imports from Iran since mid-2022, data from sources like Kpler suggest otherwise, with an average of 1.2 million barrels per day imported since 2023. These imports are often disguised as shipments from other countries, such as Malaysia, through vessel transfers.

While the effectiveness of US sanctions remains uncertain, potential consequences include fuel inflation and geopolitical tensions. Any disruptions to Iranian exports, estimated between 200,000 and 500,000 barrels per day, could further impact global oil markets. However, major supply disruptions are not anticipated, according to Goldman Sachs Group Inc., given Iran's existing challenges under stringent sanctions.

The evolving situation underscores the complex interplay between geopolitical dynamics and global oil markets. While efforts to tighten sanctions on Iran may disrupt crude flows, the resilience of Chinese refiners and alternative trading mechanisms could mitigate the impact. Ultimately, the outcome hinges on the enforcement and execution of sanctions by US authorities, with potential repercussions reverberating across energy markets worldwide.

The looming US sanctions on Iranian oil exports pose challenges for Chinese refiners but also highlight their adaptability and resilience in navigating geopolitical uncertainties. As the situation unfolds, market participants will closely monitor developments and their implications for global oil supply and prices.

Source: Bloomberg

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Cohen

Economic

Bond

The finance ministry and the Financial Supervisory Service (FSS) are in talks to change a requirement for banks to report any bond trading in the over-the-counter market to authorities within 15 minutes of each transaction.

That rule has been a major pain point in the government's efforts to court global investors into the Korean bond market. It would also need to be addressed as Korean bonds move to the Euroclear settlement platform from July this year.

No decisions have yet been made on the specific changes to the rules but could include reducing reporting requirements to once or twice a day, said the sources, which included a finance ministry official who declined to be named. A current 7pm local deadline for reporting would also need to be addressed.

"Many foreign institutions have pointed out that the requirement to report transactions manually every 15 minutes is a restriction in carrying out transactions efficiently, and we're working to improve that," a source directly involved in the government discussion said, who declined to be named due to sensitivity of the issue.

"We're communicating with relevant authorities to ease them," he said.

The FSS, South Korea's market regulator, declined to comment.

The changes would follow recent reforms Asia's fourth-largest economy has introduced as it looks to shake off its classification as an emerging market and gain acceptance to major global market benchmarks.

Inclusion in FTSE Russell's World Government Bond Index (WGBI), for example, could attract tens of billions of dollars in inflows, analysts say.

Authorities are now looking to ease a series of rules for banks and brokerages created after financial crises of past decades and designed to monitor major capital flight risks.

South Korean government bonds have been on FTSE Russell's watchlist for WGBI inclusion since September 2022 and easing the 15-minute reporting requirement could improve the prospects of index admission, the sources say.

FTSE Russell is due to release an update on its WGBI constituents in September.

South Korea needs to improve in areas such as "sound regulatory environment" and "investment restrictions" to meet the minimum standards for WGBI inclusion, a FTSE Russell report said in a 2022 report.

FTSE Russell determines WGBI inclusion based on an investor survey on market accessibility.

Foreign investors make up about 10% of the country's bond market.

Currently details of all over-the-counter transactions including price, quantity, time and parties involved need to be reported in real-time to the Korea Financial Investment Association, an industry body.

Global banks say the real-time reporting obligations currently create significant barriers for foreign investors wanting to buy large volumes of Korean bonds.

Among the regulatory reforms South Korea adopted recently to boost foreign access to its financial markets was the scrapping of a 30-year-old rule that foreigners must register with authorities in order to trade listed stocks. The won's onshore market trading hours will also be extended.

In 2022, the government scrapped taxes on foreigners' income from investments in treasury bonds and monetary stabilisation bonds.