By Yazhou Sun, Bloomberg Live
At Bloomberg Live’s “The Future of Forex” virtual event, we examine the health of the currency market and the state of FX rates with almost all governments around the world pumping out stimulus measures. David Ingles speaks to key voices and experts in FX.
Speakers included:
- Julio Callegari, Executive Director, Lead Portfolio Manager for Asia Local Rates and FX, J.P. Morgan Asset Management
- Frances Cheung, Head of Macro Strategy, Asia, Westpac Banking Corporation
- Jingyi Pan, Market Strategist, IG Asia
- Christopher Wiegand, Founder and Chief Investment Officer, Royal Bridge Capital LP
- Ruth Carson, Senior Reporter, Currencies and Rates, Bloomberg
- David Ingles, Anchor, Bloomberg Television
Click here to view video of the full discussion.
A few of the key takeaways:
- Christopher Wiegand, Founder and Chief Investment Officer, Royal Bridge Capital LP, says the US Federal Reserve has done a tremendous job since the pandemic hit, and it remains to be seen how the new monetary policy framework announced by Fed Chair Jerome Powell would roll out. Wiegand says as the US economy leaps from recovery phase to expansion phase in the coming months, the market will see dollar bounce back. He also says capital misallocations are inevitable with central banks pushing rates deeply into negative territory. Wiegand believes the 2020 US election outcome will not impact how the US dollar (USD) performs. He also thinks it’s “irrational to be adjusting” the Hong Kong-US Dollar peg in the near-term. But in the long term, as Hong Kong’s economy gets more integrated into mainland China, there’s merit to the debate of breaking the peg.
- Ruth Carlson, Senior Reporter, Currencies and Rates, Bloomberg, says despite volatility in the currency market, the US dollar (USD) is still seen as the ultimate heaven. She says traders are dumping gold and treasurers for the greenback despite fears over US-China tension in the near-term. But over the longer term, the US dollar (USD) might be facing a downward trend, and the Chinese Yuan (CNY) and the Korean Won (KRW) stand to benefit. Carlson says investors fear that the Indonesian central bank won’t act independently as the country is considering letting ministers vote on monetary policy, exposing weakness in Indonesian Rupiah (IRD). Carlson also says investors love that the Reserve Bank of Australia has been adamant about not adopting negative interest rates, which contributed to the Australian Dollar dollar (AUD) bouncing back from March’s historic low.
- Julio Callegari, Executive Director, Lead Portfolio Manager for Asia Local Rates and FX, J.P. Morgan Asset Management, believes the US dollar (USD) will get weaker over time in the medium-term. Callegari says the USD has been supported by the “US exceptionalism” in recent years, a phenomenon which has been shattered by deep recessions. He believes the vaccine development will be a big driver for emerging markets. Callegari also says with China having successfully contained COVID-19, he sees a path for appreciation of the Renminbi (CNY) despite growing geopolitical tensions and antagonism between the US and China. He says the “dual circulation” strategy that China has adopted will benefit the Taiwan Dollar (TWD) and hurt the Korean Won (KRW).
- Frances Cheung, Head of Macro Strategy, Asia, Westpac Banking Corporation, says the US dollar (USD) is taking a dent in the near-term by dimming growth prospects, recent rhetoric from the ECB and RBA, and setbacks from vaccine development. Cheung believes the market will be more risk-averse between now and the US election. She says the Chinese Renminbi (CNY) will see strengthening prospects— with no mass development of vaccines, merchandise trade in China is recovering before the services trade, pushing surplus wider and narrowing deficits. Cheung believes should the US-China tension deteriorates further, economies like Korean, Taiwan and Thailand might benefit from a further structural change in the supply chain.
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