· US DOLLAR ASEAN WEEKLY RECAP
Last week, the haven-linked US Dollar mostly lost ground to currencies from the ASEAN region such as the Singapore Dollar, Malaysian Ringgit and Thai Baht. Meanwhile, the Philippine Peso was little changed while the Indonesian Rupiah cautiously weakened. This followed rate decisions from the Philippine and Indonesian central banks, where benchmark borrowing costs were left unchanged – as expected. Broadly speaking, currencies from the developing Asia-Pacific region remain sensitive to risk appetite and there are key external developments to watch out for heading into the end of this year.
LAST WEEK’S US DOLLAR PERFORMANCE
EXTERNAL EVENT RISK – US COVID RELIEF WOES, CORONAVIRUS MUTATION, ‘NO-DEAL’ BREXIT
With that in mind, a deterioration in market mood into 2021 could offer a floor to persistent weakness in the US Dollar across the ASEAN realm. Pairs like USD/SGD, USD/THB, USD/IDR and USD/PHP could see a push higher if market volatility strikes as liquidity drains around the Christmas holiday. In fact, recent stock market jitters in the US and abroad have resulted in cautious gains in the Greenback so far this week.
ASEAN, SOUTH ASIA EVENT RISK – BANK OF THAILAND, SINGAPORE INDUSTRIAL OUTPUT, CHINESE PMI
The ASEAN economic docket is fairly light heading into the end of the year. The Bank of Thailand (BOT) is expected to leave its benchmark lending rate unchanged at 0.50% on December 23. However, what will be more interesting to watch for is commentary towards the exchange rate. The BOT has been intervening to keep the Thai Baht from appreciating too quickly given economic concerns.
Singapore industrial production on December 24th and then Chinese manufacturing PMI on the 31st will offer a further look into the health of global growth.
ASEAN-BASED USD INDEX VERSUS MSCI EMERGING MARKETS INDEX – DAILY CHART
U.S. will require negative COVID-19 tests for all UK passengers - CDC
The U.S. government will require all airline passengers arriving from the United Kingdom to test negative for COVID-19 within 72 hours of departure starting Monday amid concerns about a new coronavirus variant that may be more transmissible.
The Centers for Disease Control and Prevention (CDC) said in a statement that all airline passengers arriving from the UK must test negative in order to fly to the United States. The decision was a turnaround after the Trump administration told U.S. airlines on Tuesday it was not planning to require any testing for arriving UK passengers.
EURO PRICE GAINS LIKELY IN 1Q
The European Central Bank has made clear that it does not want to see EUR/USD above the 1.20 mark, once seen as its “line in the sand” for the pair, because of the negative impact of a strong Euro on both the Eurozone’s competitive trade position and its inflation rate. Yet it is hard to see what it can actually do about it now the pair is above that level, and that suggests further strength in EUR/USD in the weeks ahead.
EUR/USD PRICE CHART, DAILY TIMEFRAME (JANUARY 1 – DECEMBER 17, 2020)
TARGETING RESISTANCE AT 1.25
A clear target for EUR/USD bulls is the 1.25 level last reached in February 2018 and there is no fundamental reason why that should not be challenged even if the ECB tries hard to subdue the Euro to lift the Eurozone’s inflation rate. After all, direct intervention in the foreign exchanges is highly unlikely.
For sure, the ECB could ease Eurozone monetary policy still further in the first few months of 2021 to counter the impact on the economy of the coronavirus pandemic, and in the past that might have weakened the Euro. However the correlation between monetary policy and the level of the currency seems to have broken down recently so further monetary measures will likely fail to bring the Euro down.
EURO MAY BENEFIT TOO FROM ‘RISK-ON’ TRADES
The next question for EUR/USD traders is whether even more money will flow in 1Q from the relative safety of the US Dollar into assets seen as more risky, and that includes the Euro. Such a move seems likely as the coronavirus pandemic comes under control: another positive factor for EUR/USD. Note though that there is also a risk that the pandemic persists, leading to renewed safe-haven demand for Dollars and a pullback in EUR/USD before further strength emerges.
· Turkish official says vaccine from China’s Sinovac is 91.25% effective
An experimental Covid-19 vaccine developed by Chinese biopharmaceutical company Sinovac is 91.25% effective, a Turkish health official said on Thursday.
Dr. Serhat Unal, an infectious disease expert serving on Turkey’s medical board, said the finding is based on early results of late-stage trials in the country and added that the vaccine is safe.
CoronaVac is a so-called inactivated vaccine developed by Sinovac Biotech. Unal announced the initial results following randomized trials involving 7,371 volunteers.
Koca said the first shipment of three million doses of CoronaVac will be dispatched to Turkey Sunday night and arrive Monday. The vaccines were initially expected to arrive after Dec. 11, but Koca said issues with permits caused the delay. Turkey has signed a deal for 50 million doses of the vaccine.
· Japan government panel says people aged 65 or older should get priority on Covid-19 vaccine
A Japanese health ministry panel said on Friday the elderly aged 65 or older should be given priority to get vaccinated against COVID-19.
The panel also said people with underlying conditions including chronic heart disease, chronic respiratory disease and chronic kidney disease, among others, should also be given priority to receive the COVID-19 vaccine.
· South Korea to decide on tougher distancing as COVID-19 count hits another high
South Korea plans to discuss whether it needs to further tighten distancing rules this weekend as the current curbs failed to reverse a resurgence in outbreaks, with the daily coronavirus count hitting another high on Friday, officials said.
The Korea Disease Control and Prevention Agency (KDCA) reported 1,241 new coronavirus cases as of midnight Thursday, the highest daily count recorded.
Daily numbers have been hovering at record levels over the past few weeks, around 1,000, but the government resisted calls for imposing the toughest Level 3 at least for the greater Seoul area due to economic concerns, calling it a last resort.
· Hong Kong woke up on Christmas morning to the strictest Covid-19 control measures on inbound travellers yet, as city health officials overnight extended the hotel quarantine period for all arrivals from foreign countries to 21 days, throwing holiday plans for many into disarray.
The fallout from the late-night decision came as Hong Kong was expected to record around 60 new coronavirus cases on Friday.
· Taiwan fines EVA Air $35,000 after COVID infection blamed on pilot
Taiwan's Transport Ministry on Thursday fined EVA Airways Corp T$1 million ($35,000) after the government blamed one of its pilots for a rare locally transmitted case of COVID-19 because he failed to follow disease prevention rules.
Taiwan had until this week not reported domestic transmission since April 12, thanks to early and effective moves to stop the virus, including mass mask wearing and strict quarantines for all arrivals.
· Crude Oil Price Forecast – Crude Oil Shows Buying Pressure Underneath
WTI Crude Oil
The West Texas Intermediate Crude Oil market initially pulled back during the trading session on Wednesday to show more support yet again as we bounce. Ultimately, this is a market that I think continues to go towards the $50 level above, which is a large, round, psychologically significant figure and an area that has offered resistance recently. The pullback has been thought of as a buying opportunity, judging by the price action that we have seen. Furthermore, the US dollar has fallen so that of course helps this market as well. I think we are going to revisit the $50 level sooner rather than later.
Reference: CNBC, Reuters, DailyFX
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