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By XE Market Analysis March 19, 2020 2:27 pm
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    XE Market Analysis: Asia - Mar 19, 2020

    Another day, another trend high for the DXY. The index topped at three-plus year highs of 102.58, up from overnight lows of 100.78, and lows of 94.65 seen as recently as March 9. Safe-haven Dollar demand remains in force amid the virus pandemic, which has crushed all asset classes, as investors turn to cash Dollars for safety. Wall Street managed to remain in positive territory through most of the session, while Treasury yields were lower. On the data front, jobless claims rose more than expected, with this week's data beginning to capture the expected virus related job losses. The Philly Fed index fell sharply, while leading indicators were a touch better than forecasts. As has been the case since the virus outbreak, markets have shown little reaction to the numbers. EUR-USD fell to trend lows of 1.0655 from early highs of 1.0840. USD-JPY topped near 110.40, up from early lows of 109.52. USD-CAD bucked the trend, falling to 1.4422 as oil prices rallied nearly 25%. GBP-USD initially rose following the emergency BoE 15 basis point rate cut, peaking at 1.1794, before later falling to near 1.1520.

    [EUR, USD]
    EUR-USD turned higher early in the session, rallying to 1.0840 from near three-year lows of 1.0725 following news the Fed is setting up dollar swap lines with nine other central banks as it ramps up its emergency programs/facilities and facilitates dollar liquidity. Later, EUR-USD tanked to fresh lows, bottoming at 1.0655. Safe-haven Dollar demand remains in place, and will likely continue as the pandemic continues to roil global markets.

    [USD, JPY]
    USD-JPY remains near March highs, peaking at 110.40 highs after the London close. The risk backdrop appeared to be less panic-driven on Thursday, with Wall Street, for now, holding in positive territory, which has put a floor under USD-JPY. General market risk related demand for Dollars is expected to continue however, so dip-buying will likely remain in fashion for the time being.

    [GBP, USD]
    GBP-USD rallied to session highs after the BoE cut its benchmark rate to 0.1% from 0.25% and also expanded its quantitative easing program. This was the second emergency rate cut ahead of the regular council meeting next week. The quantitative easing program will be expanded by GBP 200 bln to GBP 645 bln. The FX market was expecting a 0.25% cut next week. Cable rallied from 1.1660 to over 1.1790 before later falling to 1.1520 lows.

    [USD, CHF]
    EUR-CHF fell back to five-year lows of 1.0526 in N.Y. on Wednesday . Safe haven demand for the Swiss currency has returned amid heightening concerns about the global economic disruptions being caused by efforts to contain the coronavirus. More downside for the pairing would appear to be in the cards. The Swiss central bank kept its policy rates unchanged at -0.75% today following its quarterly policy meeting, as had been widely expected. The SNB acknowledged the impact of virus developments, which also put upward pressure on the franc, and pledged that it will step up forex interventions to keep the currency under control. The SNB said growth will be likely be negative this year, and that it is considering to reduce the counter cyclical capital buffer (the German equivalent of this was cut to zero yesterday). The exemption threshold for the negative rates will be lifted, and while the SNB stressed that the banking system has sufficient liquidity for now, policymakers also emphasized that it will ensure that this stays like that.

    [USD, CAD]
    USD-CAD eased back from overnight trend highs of 1.4668, taking its cue from a rebound in oil prices, and a much more neutral risk backdrop. The pairing fell to 1.4422 lows in late morning trade. WTI crude bounced over $26.00, after printing 18-year lows under $21 on Wednesday, throwing the CAD a temporary lifeline. In addition, the Fed's set up of USD swap lines with the BoC took some urgency in USD buying off the table.

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