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Speaker 1: Let's get to our guest home in lee Is with

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Speaker 1: a Asia macro strategist at Lombard Odier on the line

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Speaker 1: from Hong Kong, Oh Man, thanks for being with us.

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Speaker 1: It's really a story about dollar strength. I mean, we're

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Speaker 1: seeing maybe a little bit of a pause here over

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Speaker 1: the last couple of trading days. But when you take

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Speaker 1: a step back, this has been stunning and it correlates

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Speaker 1: perfectly with an aggressive rate strategy, rate hike strategy, I

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Speaker 1: should say from the Fed, how much longer do you

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Speaker 1: think this can go on? This kind of dollar strength

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Speaker 1: and then in turn weakness and currencies where you are well,

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Speaker 1: thank you for your invitation, dog, and I guess, um,

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Speaker 1: going forward, we still see scope for maybe final um

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Speaker 1: over shooting of dollar against some major currencies, because the

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Speaker 1: path of least regret for for monetary policymakers, especially in

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Speaker 1: the US, still remains, UM, uh you know that of

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Speaker 1: aggressive hikes to ensure uh this inflationary process. Uh you

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Speaker 1: know next year. So um, we do see the risk

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Speaker 1: of US rates reaching uh maybe full percent right end

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Speaker 1: of this year, and maybe there's some upside risk depending

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Speaker 1: on how the label market reacts in the fourth quarter. UM.

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Speaker 1: And uh, you know, if that's the case, then uh,

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Speaker 1: you know, given what's happening elsewhere in terms of the

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Speaker 1: cruise challenges in Europe and in China, we do think

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Speaker 1: there is scope for that, you know, final over shooting.

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Speaker 1: And this is the reason why we're relatively cautious heading

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Speaker 1: into this busy week home. And Stephen angle here, I

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Speaker 1: know you're not necessarily a currency analyst, but do you

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Speaker 1: expect that Japanese authorities will not just verbally intervened, but

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Speaker 1: but actually intervened to stop the end from from going past?

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Speaker 1: I think that seems to be the psychological number, or

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Speaker 1: the tolerance number. And on the flip side China to it,

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Speaker 1: it hits seven the c n Y. But of course

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Speaker 1: the authorities they're trying to you know, put that daily

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Speaker 1: fixing stronger every day. Well, what's clear for us, you know,

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Speaker 1: regarding Japan, is that there is a significant discomfort about

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Speaker 1: yend weakness. And and this is due to the fact

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Speaker 1: that you know, again voters are you know, uncomfortable with

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Speaker 1: that shifting inflation from two or percent to two, which

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Speaker 1: I'm sure Bank of Japan appreciates, but it's it's not

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Speaker 1: an easy political transition. To make and that discomfort you know,

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Speaker 1: continues to be a factor for policy in our view.

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Speaker 1: So um, you know, the authorities have you know, have

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Speaker 1: already begun to draw the line here or the dollar

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Speaker 1: yen UM. So we still see some risk of some

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Speaker 1: tweaks in policy, either in the form of change in

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Speaker 1: the ielkve target by the Bank of Japan or a

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Speaker 1: direct effects market intervention. People at the end of the year.

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Speaker 1: We don't know what the exact you know, where the

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Speaker 1: line is exactly, but we suspect that maybe you know,

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Speaker 1: the purple interventions you know, become even more aggressive around

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Speaker 1: one forty five total. Again for China, UM, we think

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Speaker 1: the current guidance is uh, you know, stability in the

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Speaker 1: c effects from the index around the current level. UM.

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Speaker 1: So that implies because the other currencies that weekly against dollar, uh,

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Speaker 1: you know, the doll a u N above seven level.

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Speaker 1: But again, given the close capital accounts and the lack

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Speaker 1: of informal outflows, we still think the currency will likely

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Speaker 1: be kept around this level. So let's talk about the

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Speaker 1: markets home in UM as we head towards the final

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Speaker 1: quarter of the year. I think it's pretty much baked

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Speaker 1: in that the FED is going to raise by seventy

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Speaker 1: five basis points, and the other central banks will likely

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Speaker 1: follow suit in a very busy central bank week of course,

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Speaker 1: this week, what what would be your main conviction call

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Speaker 1: for markets and for portfolio? Are you still defensive? We

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Speaker 1: have been defensive, but we have become a bit more

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Speaker 1: defensive in the past few weeks and we'll likely maintain

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Speaker 1: that popsture for a while. The reason is that, yes,

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Speaker 1: it's true that there has been a lot of repricing

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Speaker 1: the fixed income markets, but their scope for a real

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Speaker 1: rage to price slightly higher UM because our expectation is

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Speaker 1: actually inflation will begin to moderate and a slightly more

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Speaker 1: visible fashion going forward without you know, a data dependent

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Speaker 1: kind of tub wish ship by the fat you know,

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Speaker 1: given their concerns about the access demand conditions in the US,

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Speaker 1: so that will create there will also sustain a bit

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Speaker 1: of politility for the markets. So in our view, UM,

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Speaker 1: obviously we have to be careful about making very large

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Speaker 1: changes at their own time, but the sensitivity to traditional

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Speaker 1: vidra UM should be you know, kept at a just

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Speaker 1: a regionable level UM and that we continue to maintain

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Speaker 1: some cat levels and also exposures to alternatives to navigate

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Speaker 1: this environment, and we think in the fourth quarter at

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Speaker 1: some point there will be a time when we can

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Speaker 1: maybe count on you know, calming down on the rate

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Speaker 1: front and on the inflation. That's when maybe we could

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Speaker 1: be uh, you know, you know, far more aggressive. But

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Speaker 1: for the time being, we think it's it's couldent to

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Speaker 1: be defensive. Last week, we had the unemployment figures for

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Speaker 1: South Korea record low two and a half percent, which

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Speaker 1: was somewhat stunning. This gives the b ok a little

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Speaker 1: bit of latitude. I mean, we were talking about the

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Speaker 1: influence of a strong dollar on currencies in Asia, and

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Speaker 1: the one, the Korean one tested came very close to

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Speaker 1: that key psychological level of against the dollar last week.

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Speaker 1: Do you think the next move from the Bank of

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Speaker 1: Korea is to tighten and will that necessarily weaken the

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Speaker 1: equity market in Seoul? So, I mean the kind of

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Speaker 1: shows why when uh, the one has been weak actually,

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Speaker 1: because the truth is that the Bank of Korea has

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Speaker 1: a lot of concerns about that servicing ratios for the households,

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Speaker 1: so they are in our view, quite careful about raising

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Speaker 1: rates too much. And this is the reason why you

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Speaker 1: see the consensus expectations for US you know, Korea rates

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Speaker 1: you know not well about three percent, so in a way,

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Speaker 1: they are tolerating you know, slightly weaker Korean one despite

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Speaker 1: the official rhetoric and and this uh you know, this

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Speaker 1: kind of pressure for the currency will remain. Um. But

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Speaker 1: we noticed that they're beginning to intervene in the markets

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Speaker 1: to smooth out the effects market volatility. So we think

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Speaker 1: they'll continue to raise, but the gap versus the US

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Speaker 1: uh you know, markets will continue to remain so in

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Speaker 1: the near term, we're causes on one. In the medium

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Speaker 1: to long term, it's a surplus country. Um, there are

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Speaker 1: having some deficits now, but we think the currency performance

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Speaker 1: will stabilize in the long term. I see that we're

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Speaker 1: cautious for the time being. I see the b Okay

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Speaker 1: next meets on October twelve. They did what half percentage

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Speaker 1: point high in July, twenty five basis points in August

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Speaker 1: and two more meetings. I believe by the end of

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Speaker 1: the year. How how many how much more tightening will

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Speaker 1: there be by the end of the year at the

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Speaker 1: b Okay based on what you just said, that's a

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Speaker 1: that's a good question, and that we see the terminal

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Speaker 1: rates for the Korea at the three point to five,

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Speaker 1: and we don't think they can go much higher given

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Speaker 1: the likely impact it will have for the households that

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Speaker 1: servicing ratio. Keep in mind that we're dealing with the

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Speaker 1: world's most indebted households UM and it's also political topics.

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Speaker 1: So in our view, they will go for the combination

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Speaker 1: of effects marketing, intervention and uh, you know, relatively muted racecycle.

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Speaker 1: Ver's just the US UM and and this is this

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Speaker 1: is kind of our expectation alright home inly Asia macro

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Speaker 1: strategist at Lombard Odier joining us this morning on a

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Speaker 1: Monday morning. Is gonna be a very very busy week

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Speaker 1: this week obviously with central bank actions including of course

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Speaker 1: the FED and other central banks, including a number of

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Speaker 1: them here in Asia Pacific