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By XE Market Analysis March 20, 2020 2:58 pm
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    XE Market Analysis: Asia - Mar 20, 2020

    The Dollar headed higher in N.Y. trade on Friday, after pulling back some through the overnight session. Pre-weekend USD demand was noted, as a flight to safety into potential risk events was a driver. Markets retained extreme levels of volatility through the session, seeing equity markets gyrate between positive and negative. Treasury yields were lower. The better than expected existing home sales report, as all data this week, was largely ignored. EUR-USD headed from early highs over 1.0705 to match Thursday's trend low of 1.0653. USD-JPY printed a near one-month high at 111.50, while USD-CAD headed over 1.4400 from lows near 1.4220. GBP-USD's overnight gains to 1.1936 were unwound, with the pairing dropping under 1.1615 into the London close.

    [EUR, USD]
    EUR-USD remained heavy, so far matching Thursday's near three-year low of 1.0653 into the London close. The overnight rally over 1.0830 came following a slight easing in global virus tensions, though Dollar demand into unknown events over the weekend saw a resurgence of EUR-USD selling. Demand of cash dollars has been intense in recent weeks due to the funds need to cover losses and meet fund redemptions. We still anticipate EUR-USD to remain biased to the downside, with aggressive coronavirus containment measures remaining still ramping up and likely to keep global markets under pressure, and in turn feed demand for dollars.

    [USD, JPY]
    USD-JPY rallied to near one-month highs of 111.50, as demand for Dollars remained into the weekend. The USD had pulled back some overnight, as markets digested the barrage of COVID-19 related monetary and fiscal stimulus over the past week or so. Though with California and now New York State now in lock-down (roughly 1 in 5 Americans), Wall Street has turned lower, and market angst has ramped up again, resulting in continued Dollar buying.

    [GBP, USD]
    Cable recovered from the 35-year low seen after the N.Y. close on Thursday, where it bottomed at 1.1412. The pairing pegged a high at 1.1931 in N.Y. morning trade, rising nearly 4 big figures from yesterday's low. Later, the Pound eased back to 1.1640, driven by pre-weekend Dollar demand. New BoE governor Andrew Bailey guided the central bank to cutting the repo rate to a record low 0.1% while expanding its QE program. This came with the UK government this week announcing a GBP 330 bln coronavirus rescue package. Assuming the peak point of aggressive coronavirus containment measures has yet to bet seen, and rescue measures may have limited impact in the face of nationwide lockdowns, the pound may yet see further bouts of weakness.

    [USD, CHF]
    EUR-CHF fell back to five-year lows of 1.0525 in N.Y. on Friday. 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 fell to 1.4150 overnight, a sharp decline from the four-year high of 1.4668 seen Wednesday. Recent moves have been linked to huge gyrations in oil prices, as the pairing remains highly negatively correlated. Thursday's record oil rally prompted heavy liquidation of USD-CAD longs. Meanwhile, the rush to broadly buy the USD this week has taken a breather into the weekend, as global central bank action to provide liquidity have calmed nerves some this morning. Canada retail sales were a bit better than expected, though were ignored by markets given the focus on virus.

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