CIBC FX Flows: FXWW

From the FXWW Chatroom: We kicked off the session with Kiwi Q4 labour report. Decent jobs growth and unemployment rate improved to 4.5%, multi-year low – our macro strategist Bipan said we are now at levels consistent where it was in 2008. The private wages may have fallen on the quarter but note the year-on-year measure is at its highest since late 2012. Bipan highlighted that RBNZ has hiked before with wages at a much lower level – so this isn’t something to ignore. Concerns with the REER have dissipated as has the political uncertainty. Additionally, the RBNZ’ mandate has changed, but that could be more hawkish and by all accounts, the next RBNZ Governor is a credible banker. The market has gone long NZD and we still like it as a currency that will perform going forward.

Nikkei started positive but UsdJpy failed to make it higher. We saw early birds picking up Usd but could not clear above 109.70. Heard offers ahead of 109.80 and then 110.00. Japanese who were better buyers yesterday were seen taking profit this morning. Intraday support comes in at 109.25/30. Better buying kicks in from 109.00 down to 108.50, where the Japanese real money bought.

We saw good two-way business in UsdCad this morning. Canadian real money were sellers at the Toronto close, we had a tough time getting out. Then Japanese sold CadJpy, paid UsdCad up to 1.25-handle. One European real money account was also seen buying Usd. I’m told that one of the big strategic names is looking to sell UsdCad on rally. This could be very interesting.

AudNzd is a pain trade. The cross fell on the Kiwi data – got to 1.0747 and slowly recovered to the 1.0780’s. AudUsd gained to 0.7910 where offers were encountered.

Euro and Cable traded sideways. EurUsd offers are mentioned near 1.2400 while bids from real money nearer to 1.2340. Those who missed the opportunity, looking to sell Cable close to 1.4000, an option strike will mature tomorrow Feb 8 worth about Gbp600mio. UK press published a leaked legal document where EU intends to punish UK during the Brexit transition should Brussels come to the judgment that Britain has infringed EU law. This isn’t fun anymore.

Asians

USDCNH led the way, traded lower at the Asia open. Platform names were the main sellers and we think this is just pure position adjustment. Offshore spot opened at 6.2777 and fell to 6.2651. One mentioned that stops under 6.2750 and 6.2700 were taken out. USDCNY fix today at 6.2882, this is out of the traders’ estimated range 6.2730-6.2830. USDCNH jumped from 6.2695 to 6.2755 but traders were not convinced and they were right. Onshore opened at 6.2793, traded down to 6.2555. Weaker USDCNY enticed sellers in the offshore.

One article in the FT said that the weakening of USDCNY because the authorities have stopped holding down its currency in wake of US President Trump trade tensions. The article highlights the benefits of weaker Usd for Chinese corporate, better borrowing ability and strengthens balance sheet.

Weaker USDCNH dragged some Asian pairs along too – UsdSgd, UsdThb, UsdTwd and UsdMyr.

UsdKrw, on the other hand, is bid. Market is still talking about outflows following the recent selloff in the local equity market. In the offshore NDF, offers are murmured atop 1100 and bids below 1075.

View the latest market information in the FXWW Chatroom with a free trial.

Leave a Reply

Your email address will not be published.