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By XE Market Analysis March 23, 2020 3:02 pm
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    XE Market Analysis: Asia - Mar 23, 2020

    The Dollar fell early in N.Y. trade on Monday, following the Fed announced it would use "its full range of tools to support the economy," announcing unlimited QE as it steps up support measures. The DXY fell from 102.81 to 101.66 before finding a footing. From there, after the U.S. Senate failed to pass a virus stimulus bill, Wall Street tanked, and demand for Dollars ramped up again taking the DXY back to 102.60. EUR-USD rallied to 108.28 from near 1.0670, later pulling back to under 1.0730. USD-JPY bottomed near 109.80, then rallied to 111.60. USD-CAD fell to 1.4337 lows, later topping at 1.4560. GBP-USD fell from 1.1676 to 1.1450 lows. More severe market volatility can be expected, as the pandemic plays out amid still near panic conditions.

    [EUR, USD]
    EUR-USD rallied to 1.0828 highs following the Fed's announcement of unlimited bond purchases. The pairing had traded to near three-year lows of 1.0636 in early Asian trade overnight. The NY Fed will be buying $75 bln in Treasuries and about $50 bln mortgage backed securities on a daily basis going forward, while Treasury Secretary Mnuchin said earlier that a lot of bonds will be issued to finance the stimulus programs. All told, this should keep some pressure on the Dollar for the near term, though safe-haven USD demand stepped later stepped in as stocks retreated again. Support is at the overnight trend low, with resistance at Friday's 1.0831 high.

    [USD, JPY]
    USD-JPY recovered from its post-Fed announcement on unlimited bond buying, falling to 109.81 from near 110.80, later topping at a one-month high of 111.59 into the London close. While the Yen is normally considered a safe-haven currency, demand for Dollars during today's risk-off conditions trumped the JPY. The February 24 high of 111.68 is the next upside target.

    [GBP, USD]
    Cable bounced briefly to 1.1676 highs after the Fed announced unlimited QE, though as stocks later melted down following the U.S. Senate's failure to pass a virus stimulus bill, safe-haven Dollar demand stepped in again, taking GBP-USD to a 1.1472 low. The Pound has few friends, even despite the government's aggressive "employment retention" coronavirus support package, detailed on Friday, which aims to keep the economy primed for a V-shaped rebound by paying up to 80% of employees pay in businesses that have been forced to suspend trade. Cable once again has Friday's 35-year low of 1.1411 back in the cross hairs. The BoE's Monetary Policy Committee meets on Wednesday and Thursday, when it will release the minutes from last week's decision to cut the repo to 0.1% and expand QE.

    [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 last week). 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 pulled back from intra day highs of 1.4491, bottoming at 1.4337 in early North American trade. The move lower came as oil prices rallied, as the risk backdrop improved following the Fed's announcement of unlimited bond buying. The pairing later rallied to 1.4560 highs, as broad USD buying stepped in, and as oil prices gave back early gains. The CAD will continue to correlate to oil price direction and general risk taking levels.

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