Foreign exchange trading reminder on October 12: Safe-haven buying pushes the dollar up, and the yen hits a three-year low

On Monday (October 11), the US dollar index rose 0.25% to 94.36, not far from the one-year high of 94.50 hit earlier this month. Driven by the rebound in global demand, oil prices rose to multi-year highs on Monday, and concerns that price increases may exacerbate the backlog of global supply chains caused Wall Street to give back early gains. Edward Moya, a senior market analyst at foreign exchange broker Oanda, said that risk aversion is playing a role to some extent. We will not get any answers to the global energy crisis or inflationary pressures in the short term. These risks may make many investors in the short term. Nei continues to focus on hedging.

The US fixed-income market was closed for a holiday on Monday, but the benchmark 10-year US Treasury yield hit a four-month high of 1.617% last Friday, despite previous data showing that the number of new jobs in the US in September was the smallest in nine months. As expected. However, the August data was revised upwards and the unemployment rate fell to the lowest in 18 months. This shows that concerns about labor shortages are still reasonable. This makes people continue to worry about inflation and gives the Fed a reason to shrink the emergency that was implemented this year. Incentive measures.

The euro to dollar fell 0.15% to $1.1552, an intraday gain of 0.2%; traders said that selling near 1.1600 is considered to limit the near-term trend.

The yen performed the worst against the dollar among G-10 currencies; the dollar rose 1% to 113.41 yen against the yen, driven by stop losses and crosses; the euro rose 1.1% against the yen to a four-month high of 131.23 The implied volatility of the yen has generally risen, jumping to 6.625% in one-year terms, the highest level since May.

Roberto Cobo Garcia, head of foreign exchange strategy at the Bank of Spain (BBVA), said that as the yields of Japanese government government bonds are firmly anchored and the Bank of Japan maintains its policy unchanged, the expectation that the Federal Reserve will soon announce a reduction in quantitative easing should push up U.S. debt. Yields are expected to push the USD/JPY into a higher range.

The main risk of USD/JPY this week comes from US data. The US will announce consumer price index (CPI) and retail sales data. Kathy Lien, managing director of BK Asset Management, said that investors need to be a little more careful.

The Australian dollar hit its highest level against the US dollar since September 14 and rose 0.57% late in the session to trade at US$0.7351, thanks to the firming of commodity prices and the partial restart of Australia’s largest city, Sydney.

Concerns about inflation are not limited to the United States. Supply disruptions and rising commodity prices affect many countries. The pound rose for a while in early trading in London, due to growing expectations that the Bank of England may raise interest rates to curb inflation. However, due to energy price concerns, it later gave up the gains. New York fell 0.15% to $1.3595 at the end of the session.

The Canadian market was closed for a holiday, but the Canadian dollar hit a two-month high of 1.24465 due to unexpectedly strong Canadian non-agricultural employment data released last Friday and high oil prices.

Preview Tuesday

09:00 The Bank of Korea announces interest rate decision
20:30 European Central Bank Chief Economist Lien delivered a speech
23:15 Fed Vice Chairman Clarida delivered a speech at the Annual Meeting of the International Finance Association 00:30 AM 2021 FOMC Voting Committee and Atlanta Fed Chairman Bostic delivered a speech on inflation

Summary of Institutional Views

The U.S. dollar against the yen hit a new high in the past three years, and Mizuho Bank analysts said it can be attributed to "triple factors"

The U.S. dollar against the yen continued to rise on Monday, once rising by more than 1%, reaching a maximum of 113.41, the highest level since December 2018. The yen led the decline in the G-10 currency against the U.S. dollar, and it was also the worst-performing currency in the past month.

Neil Jones, head of foreign exchange sales at the financial institution of Mizuho Bank, said that the weakening of the yen was affected by a "triple factor impact." Businessmen want to buy more U.S. dollars for the same amount of raw materials; three recent domestic political changes indicate that capital gains tax may be temporarily improbable, and stimulate demand for the Japanese stock market."

Commerzbank: Once inflation in the euro zone eases, the Swiss franc may fall against the euro

With the easing of price pressures in the euro zone, the Swiss franc may depreciate moderately against the euro next year. Currency analysts said: “The rising inflation rate in the euro zone is currently weighing on the euro because the European Central Bank is not expected to respond adequately to high inflation.” The euro will remain weak for the time being, but as inflation in the euro zone slows next year, It should be stronger. On the other hand, factors unique to Switzerland are unlikely to have a significant impact on the exchange rate level of the euro against the Swiss franc. "Therefore, it is expected that by December 2022, the Euro/Swiss franc pair will rise to 1.12, which is currently flat at 1.0716.

Societe Generale: The Bank of England’s policy comments herald the approach of raising interest rates

Societe Generale analyst Brian Hilliard said that the comments made by the Governor of the Bank of England Bailey and the member of the Bank of England Sanders over the weekend emphasized the risk of rising inflation and “added fire” to the expectation of this year's interest rate hikes set by the money market. However, Hilliard believes that the market’s forecast for a November rate hike is still too early, because the government and the market seem to have overlooked the potential damage to economic activity caused by the energy situation. After the release of employment and GDP data this week, Societe Generale is expected to reassess its current interest rate hike expectations for the Bank of England, that is, it will not raise interest rates until August 22 next year, because it seems "increasingly too cautious." ".

HSBC: New Zealand dollar expected to weaken gradually in the next twelve months

HSBC expects that the New Zealand Fed’s next interest rate hike of 25 basis points will be carried out in November and will further raise interest rates next year. In addition, it is still expected that the New Zealand dollar will weaken slightly against the US dollar in the next 12 months. The core assumption is that they will be in New Zealand in 2021. Increased its cash rate to 0.75% in November, and will raise interest rates further next year, and increase the interest rate to 1.50% by the end of 2022. However, the delta mutant virus and the transition to "surviving with the virus" will still affect New Zealand's domestic growth. Posing obvious near-term downside risks, the New Zealand dollar is expected to fluctuate within a narrow range against the US dollar in the near future, although it will weaken slightly in the next twelve months.