25 Feb 2015
Higher fixing bias reinforces upside risks for USD/CNH – Westpac
FXStreet (Barcelona) - Jonathan Cavenagh of Westpac, views that today's stronger than expected USD/CNY fix adds to the upside risks for USD/CNH, expecting a test of 6.3000 and adding that such a backdrop will likely have negative spillover effects for other EM Asian currencies.
Key Quotes
“Our expectation remains that the risks are that the fixing bias remains skewed to the upside as we progress through March. This should keep onshore spot fairly close to top of the daily trading band and keep USD/CNH well supported on dips towards the 6.2600 level.”
“Upside targets for USD/CNH remain for a move into the low 6.3000 region.”
“Such a backdrop will likely have negative spillover effects for other EM Asian currencies, particularly the likes of TWD, KRW and SGD.”
“However, a softer USD backdrop in the aftermath of Yellen’s testimony overnight, plus lower risk aversion levels, suggest now is potentially not the best time to step up from a risk/reward perspectve and go long the USD against these currencies. However, all three pairs remain a buy on dips.”
“We would expect 1 month USD/TWD to find a base between 31.20/30, USD/KRW – 1090/1095 and USD/SGD – 1.3475/1.3525.”
Key Quotes
“Our expectation remains that the risks are that the fixing bias remains skewed to the upside as we progress through March. This should keep onshore spot fairly close to top of the daily trading band and keep USD/CNH well supported on dips towards the 6.2600 level.”
“Upside targets for USD/CNH remain for a move into the low 6.3000 region.”
“Such a backdrop will likely have negative spillover effects for other EM Asian currencies, particularly the likes of TWD, KRW and SGD.”
“However, a softer USD backdrop in the aftermath of Yellen’s testimony overnight, plus lower risk aversion levels, suggest now is potentially not the best time to step up from a risk/reward perspectve and go long the USD against these currencies. However, all three pairs remain a buy on dips.”
“We would expect 1 month USD/TWD to find a base between 31.20/30, USD/KRW – 1090/1095 and USD/SGD – 1.3475/1.3525.”