Exotic currencies report
Two of the funding currencies in Asia have moved from strength to strength recently, with the SGD pressing through 1.41 o/n and the TWD surging through 31.50. The SGD move is tied to the view that the MAS will allow the SGD to continue to rally in an effort to fight inflation. Wire reports have a 5.6% expectation for this on Monday, which would be a big jump and may cause some concern. However, given that much of this will be on revised property prices, electricity bills going higher and the Chinese Lunar New Year holiday (where for some reason shops raise prices, tsk tsk tsk) the MAS may take a longer view and see that these are one-offs or taxes. Still, a turn below 1.40 is becoming the big risk if 1.41 is lost on a sustained basis over the coming week, with 1.38+ then in play for 1.35+ . Value? The USD is looking cheap, but in FX markets, currencies can get ‘cheaper’ and stay ‘cheap’ for much longer than many expect. Technically 1.4220/30 should mark res. to try and regain to turn the tide. The sharp moves in the TWD over the last 6 weeks or so have been a surprise, as the CB there has been known to keep the currency in a relatively stable range as exporters like the stability. The move from 32.50 to near 31.30 now has been ignored by the stock market though as semi’s caught a bid, but given that the upmove in the TWSE looks like a ‘corrective bounce’ then chances are that upticks here stall shy of 8500, with a turn below 7400/7300 then open for 6000 and lower. For the TWD? The CB is already on the wires saying that they didn’t say that they thought the strong TWD helped contain inflation, the risk of them actually protesting the TWD gains should be ratcheting up. Use 31.60/31.80 as the turn points for 32.50+, unless 31.80 is regained though 30.50 for 30 is at risk in the near term…
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