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Speaker 1: Let's get to our guests now. DVI dives is Asia

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Speaker 1: Effects Strategistic Standard charted joining us on the line from Singapore. Well,

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Speaker 1: when we look at what we heard from the Fed,

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Speaker 1: they basically indicated that they are not going to do

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Speaker 1: what the Australians did and pivot in their inflation battle.

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Speaker 1: What does that mean for this relentless US dollar rally? UM,

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Speaker 1: Good morning, Juliet. Well, if you think about what has

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Speaker 1: really driven the dollar, I mean, obviously a large part

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Speaker 1: of it is what's what's happened with the Fed. There's

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Speaker 1: obviously a geopolitical angle, and there's a China growth angle,

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Speaker 1: and fundamentally you can argue that, you know, none of

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Speaker 1: these three main factors are reversing any time soon. Um,

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Speaker 1: But we have to sort of consider near term market

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Speaker 1: dynamics and September was a particularly brutal month for Asian

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Speaker 1: currencies more broadly, In fact, September was the worst month

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Speaker 1: for Asia Effects since two thousand eleven. So there is

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Speaker 1: a fair amount of long dollar positioning which is in

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Speaker 1: the markets. Clearly, we are going into the Party Congress

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Speaker 1: in China, which usually is a wall dampener event for

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Speaker 1: markets as well, and c n why it tends to

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Speaker 1: be quite stable during that period. We're also seeing some

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Speaker 1: central bank interventions, not just official direct interventions, but also

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Speaker 1: via some other macro potential measures. So there's there's a

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Speaker 1: bunch of factors which are coming together at a point

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Speaker 1: when market is quite long dollars. So I think near

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Speaker 1: term there is some downside risks for the dollar, but

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Speaker 1: fundamentally we still like medium term bullish dollar. You. I

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Speaker 1: do want to get to to your calls on specific

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Speaker 1: Asian currencies in a moment, but when to continue to

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Speaker 1: talk about the strength of the dollar. We had that

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Speaker 1: m Live Pulse survey recently here on Bloomberg about whether

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Speaker 1: or not there should be some kind of orchestrated attempt

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Speaker 1: by major world powers to weaken the strength of the dollar,

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Speaker 1: and said, yes, do you think that that is actually likely? Well,

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Speaker 1: it seems quite unlikely to us, especially at this point. UM.

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Speaker 1: I think the US is quite happy with the strength

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Speaker 1: of the dollar. Obviously, they are exporting inflation to the

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Speaker 1: rest of the world. UM. Obviously there are being sort

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Speaker 1: of parallels being drawn with respect to the Plaza coord

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Speaker 1: In five. UM, but I think there's a few differences. Obviously,

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Speaker 1: I mean inflation back then was at three percent. Today's

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Speaker 1: stay closer to eight percent. At the same time, if

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Speaker 1: you look at the strength of the dollar itself in

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Speaker 1: real terms, dollar is still about ten percent below levels

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Speaker 1: where it was during the peak in March UM, so

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Speaker 1: we are not quite there yet. But having said that,

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Speaker 1: I think if if this dollar relentless dollar strength continues

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Speaker 1: over the next months and quarters, I think that could

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Speaker 1: lead to some serious credit issues um for the rest

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Speaker 1: of the world, and I think that can come back

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Speaker 1: to hurt the US economy UM, and that might change

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Speaker 1: the US view. But at this point, I really don't

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Speaker 1: see any reason for a coordinated intervention. When to get

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Speaker 1: more of your thoughts on Asian currencies in particular, you

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Speaker 1: mentioned intervention. We've seen that from Japan, India, China, and

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Speaker 1: Bloomberg Intelligence actually pairing their forecast for PBOC easing this year.

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Speaker 1: Given the yuan has taken such a beating from the

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Speaker 1: widening your disadvantage against the dollar, what kind of I

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Speaker 1: guess further moves do you expect from the PBOC to

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Speaker 1: try and show up its currency. So I think the

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Speaker 1: next few weeks we're probably going to see more stability

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Speaker 1: from the yuan. Obviously in line with the Party Congress,

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Speaker 1: I think there will be a very clear step up

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Speaker 1: in terms of response and trying to manage the currency.

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Speaker 1: We have already seen fixings which have significantly deviated from

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Speaker 1: where spot has been. We have seen introduction of c

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Speaker 1: c A into the fix. Um. I think there might

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Speaker 1: even be some more measures which target capital outflows and

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Speaker 1: sort of tightening the rules around those outflows. UM. But

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Speaker 1: I think the product picture here is if you look

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Speaker 1: at c N why on a trade weighted basis, um,

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Speaker 1: I mean, it still remains quite stable. We haven't really

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Speaker 1: seen the kind of panic that we had in twenty fifteen,

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Speaker 1: so to that extent, it is still remains a dollar story.

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Speaker 1: I don't think the authorities are going to be two

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Speaker 1: concerned about the kind of moves that we are seeing. UM. Also,

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Speaker 1: I think the medium term story for China I think

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Speaker 1: is still quite intact, especially for next year. We're still

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Speaker 1: looking at a growth recovery which we think will support

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Speaker 1: the UN next year. Alright, what about when it comes

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Speaker 1: to the yen and we had those bo j intervention

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Speaker 1: risks there You're saying it's a two way risk for Dollian, Well, exactly.

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Speaker 1: I think the MFS intervention UM sort of has drawn

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Speaker 1: a temporary line in the sand for dollyan around one

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Speaker 1: forty five and forty six. So whenever we approach those

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Speaker 1: kind of levels, markets get quite concerned about those intervention risks. UM.

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Speaker 1: In fact, our sort of regression model on dollar yen

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Speaker 1: which runs sort of UM d X Y index s

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Speaker 1: n P n U S tresuries, it says that intervention

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Speaker 1: has basically led to yen strengthening by about two percent,

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Speaker 1: So it's it has been quite an effective intervention. They

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Speaker 1: only spent about twenty billion dollars UM. But it does

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Speaker 1: mean that you know, there's probably more two way risks

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Speaker 1: for dolly, and it's it's not a very clear long

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Speaker 1: dollar trade in our view. Uh, surely the Montree policy

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Speaker 1: divergence theme remains, but the risk of intervention means that

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Speaker 1: markets are quite cautious about chasing that long dollar yen move.

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Speaker 1: You've mentioned you expected challenging back drop for an effects

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Speaker 1: and that is on the back of course of this

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Speaker 1: strong dollar. But why is this Singapore dollar a rare winner? Here?

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Speaker 1: We've got the m a as tightening and I guess

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Speaker 1: how much further sort of strength or resilience do you

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Speaker 1: see from the sing dollar. Well, the way we think

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Speaker 1: about sing dollars is it's perhaps going to outperform most

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Speaker 1: of the currencies in Asia, but not really against the dollar.

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Speaker 1: So I think the bigger support for the sing dollar

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Speaker 1: really comes from the monetary policy tightening. Uh, the MS

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Speaker 1: has already tightened by over five basis points via increase

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Speaker 1: in the sing near both changes to slope and center.

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Speaker 1: We are still looking at further tightening in a couple

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Speaker 1: of weeks time, and I think that directly sort of

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Speaker 1: translates into things resilience in in trade weighted terms against

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Speaker 1: the dollar obviously, I think you know what happens with

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Speaker 1: the broad dollar index tends to matter more um so,

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Speaker 1: perhaps not against the dollar, but against the other currencies.

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Speaker 1: We still see sing as being quite strong in the

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Speaker 1: short term. The medium term risks are a little bit

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Speaker 1: elevated because next year we still expect US and UK

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Speaker 1: to be in a recession, so that would impact seeing

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Speaker 1: via slowed down in global trade. All Right, Finally, let's

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Speaker 1: get to the Kway and AUSSI. A big job in

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Speaker 1: the AUSSI yesterday after the abb A surprise, We've just

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Speaker 1: a twenty five basis point high. We've got the ab

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Speaker 1: B and Z today. Do you think there could be

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Speaker 1: a surprise there too, and what does that mean for

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Speaker 1: the KWA. Well, we are still looking at fifty from

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Speaker 1: the RBNZID. Clearly RBA was devish surprise in our view,

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Speaker 1: but we have remained parish on KIV. In fact, I

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Speaker 1: mean we still have sort of a relative value trade

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Speaker 1: to be shot KIV versus long. The Korean bond KIWI

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Speaker 1: for us is largely an expression of the broader risk sentiment,

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Speaker 1: and we still think that the bounds that we're seeing

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Speaker 1: in equities is going to be quite short lived. So

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Speaker 1: we're still bearish on Kiwi, bearish on KWA. Dvia thank

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Speaker 1: you as always. Da Davish is with us from Standard Charted.

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Speaker 1: Asia Effects Strategists joining us on the line from Singapore