MAS Policy: Singapore Braces for a Hawkish Signal

U.S. intelligence reports are raising serious doubts about whether Venezuela's interim president, Delcy Rodriguez, will align with Washington's strategic goals, according to four sources familiar with the matter.

After capturing former President Nicolas Maduro on January 3, the Trump administration backed Rodriguez. However, there is now uncertainty over her willingness to formally cut ties with key U.S. adversaries, including Russia, China, and Iran.

Washington's High-Stakes Bet in Caracas

The U.S. has been public about its expectations for the new government. Officials want Rodriguez to sever diplomatic relations with these rival nations, which would involve expelling their diplomats and advisors from Venezuelan soil. This geopolitical pivot is central to the Trump administration's strategy to curb its foes' influence in the Western Hemisphere and open up Venezuela's vast oil reserves to U.S. investment.

The challenge is that Rodriguez has not yet publicly committed to this course of action. Representatives from Russia, China, and Iran even attended her swearing-in ceremony.

The situation underscores the risks of Washington's approach. If Rodriguez resists U.S. directives, it could undermine the administration's ability to steer the country's future from a distance and potentially force a deeper American military role.

CIA Director John Ratcliffe traveled to Caracas on January 15 to discuss the country's political future with Rodriguez, though it remains undetermined if their conversation shifted the intelligence community's assessment.

When asked for comment, a senior Trump administration official stated that President Donald Trump "continues to exert maximum leverage" over Venezuela's leaders and "expects this cooperation to continue."

The Challenge of Abandoning Old Allies

For Venezuela, complying with U.S. demands means abandoning its closest international partners. These alliances are deeply integrated into the country's economy and security:

• Iran has provided technical assistance to help repair Venezuela's oil refineries.

• China has accepted Venezuelan oil as repayment for significant debt.

• Russia has been a primary supplier of weaponry, including missiles, to the military.

• Cuba has offered security and intelligence support in exchange for discounted Venezuelan oil.

Breaking these ties would represent a fundamental and difficult shift in Venezuela's foreign policy.

Rodriguez's Mixed Signals and Washington's Dilemma

Since taking office, Rodriguez has sent contradictory messages. On one hand, she has taken steps to placate Washington, including releasing political prisoners and authorizing the sale of 30 million to 50 million barrels of oil to the United States.

On the other hand, she declared in a recent speech that she has had "enough" of U.S. intervention. Despite this public defiance, two sources confirmed that U.S. officials have held positive calls with her in recent days.

The CIA had previously assessed that officials loyal to Maduro, like Rodriguez, were the best positioned to govern after his removal. However, critics of the strategy have long been concerned about the reliability of Maduro's inner circle.

With no immediate alternative, the Trump administration appears committed to working with Rodriguez for now, given its strong public backing of her. In the background, however, U.S. officials are developing contacts with senior military and security leaders as a contingency plan.

Maria Machado: A Potential Long-Term Option?

Another figure being considered is opposition leader Maria Corina Machado. President Trump recently told reporters he wanted Machado "involved" in the country's leadership.

However, recent intelligence reports conclude that she is not currently capable of running the country, primarily because she lacks strong ties to Venezuela's powerful security services and oil sector.

Machado remains popular among Venezuelans, and her movement claims she won a 2024 election by a large margin, though the state recognized Maduro as the victor. One source familiar with the administration's discussions said the White House views her favorably as a "longer-term option" for a leadership position, possibly starting in an advisory role. No firm decision has been made.

What Bloomberg Strategists say...

Source: Bloomberg

Members of the Federal Reserve's key policy committee are free to vote their conscience. But a new study suggests that casting a vote against the majority carries a professional price, making the recent trend of dissent at the central bank all the more significant.

According to a research paper published by the National Bureau of Economic Research (NBER), members of the Federal Open Market Committee (FOMC) who vote against the consensus are less likely to influence future policy decisions.

This finding adds critical context to the Fed's recent meetings, which have seen an unusual number of dissenting votes amid sharp divisions over how to manage the economy.

The Price of Breaking Consensus

Researchers from institutions including the University of California, Berkeley, and the Fed itself analyzed historical meeting transcripts and voting records to understand the group dynamics of the FOMC. Most of the committee's votes on interest rates are unanimous, and the study sought to find out why.

The paper revealed two key findings:

• The Fed Chair is highly influential in guiding the committee toward a unanimous opinion.

• When a member dissents, their preferred interest rate policy becomes about one-third less likely to be adopted at a later meeting.

The study suggests this could be a form of punishment for breaking ranks. However, the authors also consider an alternative explanation: "FOMC members only dissent when they realize the battle is lost and their viewpoint will not carry the day in future meetings."

Regardless of the motive, the outcome is the same. The researchers concluded that "dissent not only does not move subsequent committee decisions toward the individual's policy preference, but comes at the added cost of future loss of influence."

A Recent Spike in Dissenting Votes

This dynamic makes the recent string of disagreements at the Fed particularly noteworthy. At its last three meetings, the majority of officials voted for a quarter-point rate cut, but each decision was met with public dissents. Some members argued for holding rates steady, while others pushed for even deeper cuts.

This breakdown in consensus underscores a fundamental dilemma facing the central bank. Officials are torn between two competing threats: stubbornly high inflation on one side and a worrying slowdown in the job market on the other.

Recent speeches from FOMC members have laid bare these sharply divergent economic outlooks. One camp views inflation as the primary danger, while the other sees the cooling labor market as a signal that rising unemployment could be imminent.

The federal funds rate is the Fed's primary tool for navigating its dual mandate from Congress—to maintain both low inflation and high employment. As the committee weighs its next move, it is widely expected to hold the rate steady on Wednesday to gather more data on how its recent policies have impacted the economy.

Source: Bloomberg

The United States is not yet prepared to lift tariffs on Indian goods, as India must first do more to address Washington's concerns over its continued purchases of Russian oil.

According to US Trade Representative Jamieson Greer, a deal to provide tariff relief remains distant until India further reduces its reliance on discounted Russian crude.

Russian Oil Remains a Key Obstacle

In a Fox Business interview on Tuesday, Greer acknowledged that New Delhi has "made a lot of progress" in curbing its intake of Russian crude. However, he noted that completely weaning off these supplies is challenging for India because "they like the discount that you get from Russian oil."

This dynamic is the central sticking point in ongoing trade negotiations. The 50% tariff, imposed by President Donald Trump last year, was a direct response to the view that India's oil purchases were helping to finance Russia's war effort in Ukraine.

"I am in frequent contact with my counterpart in India. I have a great working relationship with him, but they still have a ways to go on this point," Greer said, signaling that current efforts are insufficient.

Analysts project that discounted Russian crude will continue to represent a significant portion of India's oil imports, a trend that could persist well into 2026.

India Finalizes Major Trade Pact with EU

While talks with the U.S. have stalled, India has successfully finalized a long-awaited free-trade agreement with the European Union. The pact, which was two decades in the making, is widely seen as a strategic move to counter aggressive American trade policies.

Greer commented on the new agreement, stating that India appears to be the clear winner.

"I think India comes out on top on this. Frankly, they have more market access into Europe. It sounds like they have some additional immigration rights," he said Tuesday.

He added that India is positioned for a "heyday" with the deal, leveraging its low-cost labor. Greer contrasted the EU's approach with Washington's, noting, "it looks like the EU is doubling down on globalization when we're trying to fix some of the problems with globalization here in the US."

The Japanese yen surged to the 152 level against the U.S. dollar on Tuesday, reaching its strongest point since November 7. The move was driven by comments from Japan's finance minister that fueled speculation of a potential joint currency intervention with the United States.

Japan Hints at Coordinated Market Action

Speaking to reporters after a virtual meeting of G7 finance ministers, Japanese Finance Minister Satsuki Katayama stated, "We will take appropriate action as necessary in close cooperation with U.S. authorities."

This statement was interpreted by traders as a signal that officials in both countries might be preparing to step in to support the yen and prevent it from weakening further.

Adding to the speculation were reports from the previous week that the Federal Reserve had conducted a "rate check"—a practice often seen as a preliminary step before a foreign exchange intervention. However, when asked about these checks on Monday, Japan's top currency diplomat, Atsushi Mimura, said he had "no intention of answering."

US Response and Broader Dollar Trends

The view from the White House presented a different perspective. When asked if he was concerned about a weakening dollar, U.S. President Donald Trump told reporters in Iowa, "No, I think it's great." He added that he wanted the dollar "to seek its own level, which is the fair thing to do."

The yen's advance comes amid a period of broad weakness for the U.S. dollar. The dollar index, which measures its value against a basket of other currencies, has fallen to its lowest level since February 2022.

Several factors have contributed to the dollar's decline, including:

• The Trump administration's stated desire for the Federal Reserve to lower interest rates.

• Ongoing geopolitical risks.

• Friction related to trade tariffs.

How Traders Are Positioned

The sentiment against the dollar is also reflected in market positioning. According to a January Bank of America survey of approximately 200 fund managers, the most crowded trades were being long gold, buying tech stocks, and shorting the U.S. dollar.