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December 23 – The Singapore dollar and most Asian currencies strengthened against the US dollar in early trading as lower US Treasury yields reduced the attractiveness of US fixed-income assets. Deepali Bhargava, Head of Asia Pacific Research at ING, noted that the Singapore dollar is one of the strongest performing Asian currencies this year. She stated that Singapore avoided the worst impact of US tariffs, securing the lowest retaliatory tariff rate of 10%. Bhargava added that looking ahead, a weakening US dollar is expected to provide support for Asian currencies.On December 23, the Reserve Bank of Australias (RBA) December meeting minutes revealed that the bank maintained a hawkish tone as policymakers closely monitor inflation trends. Sally Auld, Chief Economist at National Australia Bank Group, commented that the minutes "reflected anxiety about recent inflation trends." She added that the RBA believes there is some excess demand in the current economic climate but is uncertain whether existing financial conditions are sufficiently restrictive to balance aggregate demand with aggregate supply. The minutes showed that the RBA discussed the potential need for an interest rate hike next year. Notably, market expectations have shifted significantly: previously, the market anticipated a further 25 basis point cut in the official cash rate by the end of 2026, but now it expects a 25 basis point rate hike at that time.On December 23rd, Futures News reported that the recent escalation of tensions, stemming from the USs continued detention of South American oil tankers and Trumps increased restrictions on South America, has fueled market concerns about potential oil supply disruptions, pushing up oil prices. US crude oil has already rebounded by $2 per barrel from its lows. Zhuochuang Information predicts that while the escalating situation in South America provides upward momentum for oil prices, negotiations in a certain European country are exerting downward pressure. Frequent geopolitical disturbances are causing wide price fluctuations. In the short term, attention should be paid to the sustainability of the oil price rebound, which is expected to remain bullish.Sources say Japan is likely to assume long-term interest rates of around 3% in its fiscal year 2026 budget, the highest level in 29 years.December 23 – The policy allowing Guangdong vehicles to enter Hong Kongs urban areas officially took effect at midnight today (December 23), with 100 slots available daily. Approved and successfully booked Guangdong vehicles can enter Hong Kong via the Hong Kong-Zhuhai-Macau Bridge, staying for a maximum of three days each time. Hong Kongs Secretary for Transport and Logistics, Chan Mei-po, stated that nearly all 100 slots were booked on the first day. Due to the upcoming long holiday in Hong Kong, the response to the "Guangdong vehicles southbound" measure has been very positive, and the Bureau will closely monitor the situation, including observing the number of vehicles entering Hong Kong. Chan Mei-po explained that most of the vehicles entering Hong Kong are electric vehicles, and the Hong Kong SAR government will gradually increase the number of charging facilities in the future.

The NZD/USD exchange rate is under pressure as investors anticipate crucial US developments

Alina Haynes

Dec 12, 2022 15:37

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Beginning with a high of 0.6411 and a low of 0.6382, the NZD/USD exchange rate is down 0.25 percent, sliding from its previous high of 0.6411 to its previous low of 0.6382. To date, though, it has been the best-performing G10 currency month.

 

ANZ Bank analysts commented, "NZD seasonality is normally positive in December, but while it has that plus rising interest rates on its side, there are no guarantees that it will emerge undamaged from this week's several central bank meetings."

 

The Federal Open Market Committee is due to meet this week, and market participants anticipate a hawkish result. The US producer price index for November was somewhat higher than anticipated, bolstering the case for the Federal Reserve to raise interest rates in the future, albeit at a slower rate.

 

TD Securities analysts estimate that the FOMC will raise rates by 50 basis points at its meeting in December, putting the target range for the Fed funds rate to 4.25 percent to 4.50 percent. "By doing so, the Committee's inflation-adjusted monetary policy stance would move into the restrictive zone. In September, we think that the FOMC will indicate that they will have to shift to a higher-than-expected terminal rate.

 

ANZ Bank analysts stated, "Our key concern is what this may do to the USD, which has been under pressure as the "pivot" narrative has gained traction amid signs of ongoing US inflation."

 

"NZ variables will also play a role, with the HYEFU and GDP due this week," but they are likely to be overwhelmed (again!) by volatility and the global climate.

 

In other news, the US consumer inflation report on Tuesday will set the tone for markets prior to the Federal Reserve meeting. Economists forecast a fall in core inflation to 6.1% in November from 6.3% in October.

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