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By XE Market Analysis October 28, 2020 2:58 pm
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    XE Market Analysis: Asia - Oct 28, 2020

    The Dollar rose through the London mornings session into early N.Y. trade before sputtering a bit lower through the remainder of the session. The DXY climbed from overnight lows of 93.05 to 93.64, before easing back to 93.37 lows. USD buying was triggered overnight, as equity markets sold off on the back of soaring Covid cases around the globe. Safe-haven demand for the currency was the driver. For data, the September advance goods trade deficit narrowed more than expected, but had little impact on the markets. Wall Street tanked again, as the combination of Covid, lack of stimulus, mixed earnings and the looming election kept investors fretting. Treasury yields were modestly lower. EUR-USD fell from 1.1785 in London to 1.1718 early in N.Y. later heading back toward 1.1760. USD-JPY rallied from 104.13 seen at the open, to 109.45. USD-CAD rallied sharply to 1.3322 from 1.3250 on lower oil prices, and a dovish BoC, while GBP-USD touched 1.3917 lows, down from 1.3064 in London, later bouncing over 1.3010.

    [EUR, USD]
    EUR-USD fell to eight-session lows of 1.1718 in early N.Y., down from London highs of 1.1785. The move lower came as safe-haven USD buying emerged on the risk-off outbreak, caused by increasing COVID spikes and accompanying restrictions and mitigation levels seen globally. Should risk-off persist into the U.S. election next week, which looks to be a fair bet, further Dollar strength can be expected. A round of London short covering saw the pairing bounce to 1.1755, though selling into modest strength is expected. For EUR-USD, support is now at the October 19 low of 1.1703.

    [USD, JPY]
    USD-JPY has lifted from its one-plus month low of 104.13 seen into the open, rallying to 104.45 in early trade. Japanese account Yen repatriations was noted on Tuesday, with funds reportedly being brought home ahead of the uncertainties surrounding the U.S. election next week. More of the same was evident through the Asian session. Since then safe-haven USD buying has been a feature given the sharp risk-off backdrop, which has seen the DXY rally from 93.06 to 93.64. USD-JPY later steadied near 104.30.

    [GBP, USD]
    Cable fell from 1.3061 in London to N.Y. lows of 1.2917 early in the session, later bouncing to 1.3010 into the London close. European currencies are out of favor with many major European nations reportedly on the verge of implementing national lockdowns. The UK currency was a big underperformer during the global lockdowns earlier in the year. The Brexit endgame is also in the mix. Negotiations are continuing, and the teams are reportedly working to a mid-November deadline. Market participants are cautiously optimistic that at least a narrow free trade deal will be reached, but still await concrete news that the two sides have reached a breakthrough on the key sticking points. The central criteria for the pound's future trajectory will be what impact any deal has on the UK's terms of trade. The narrower any trade deal is, the bigger the impact on the UK's trading position will be on January 1.

    [USD, CHF]
    The Swiss franc has been trading with a firming bias, consistently rebounding from bouts of weakness in recent months and driving the EUR-CHF cross to levels under 1.0700 last week for the first time in three months. Markets are anticipating revamped monetary easing measures from the ECB while factoring in Brexit risk. The franc has a proclivity to ascend on the back of its balance of payments position. The SNB stated at its quarterly monetary policy review last month that the franc remains "highly valued" and said it is ready to "intervene more strongly in the foreign exchange market."

    [USD, CAD]
    USD-CAD rallied to three-week highs of 1.3292 in early North American trade, taking its cue from crashing oil prices, risk-off conditions, and a broadly firmer USD. The pairing had printed overnight lows of 1.3180. WTI crude dropped 6% to lows near $37.0, as demand concerns persist given the surging Covid backdrop. The pairing later touched highs of 1.3322, up from 1.3280 following the BoC announcement, which kept rates unchanged, as expected. There were no real surprises from the statement, though the Bank did tweak its QE program, "to shift purchases towards longer-term bonds, which have more direct influence on the borrowing rates that are most important for households and businesses. At the same time, total purchases will be gradually reduced to at least $4 billion a week". The Bank noted that for "the fourth quarter, (Canada) growth is expected to slow markedly, due in part to rising COVID-19 case numbers". USD-CAD had been on the rise through the session as oil prices dropped better than 6%.

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