Ahead Today
G3: -
Asia: Singapore CPI, Taiwan Unemployment Rate
Market Highlights
The US dollar has lost further momentum and extended its recent soft patch. Recent market focus has shifted towards the policy implications of Treasury Secretary Scott Bessent's efforts to rein in the surge in long-end yields and the narrative of a possible debasement trade.
While economists have upgraded US Q3 GDP growth forecasts to 2.5% annualized from 2.0%, supporting the narrative of continued US economic resilience, the dollar has struggled to benefit as markets weigh the longer-term implications of elevated fiscal deficits and long-end Treasury yields.
The recent decline in the dollar has brought it near to key support levels. But US yields remain elevated, while speculative positioning data suggest investors continue to retain a modest net long USD bias. The divergence between relatively resilient USD positioning and weaker price action points more towards fading dollar upside momentum for now. It remains to be seen whether markets price in negative risk premium on the dollar, particularly with President Trump recently hitting 50% tariffs on about $20bn in Canadian goods (about 4-5% of Canada’s annual exports to US).
Within Asia, a softer dollar backdrop in the near term continues to provide some relief, but regional performance is likely to remain highly differentiated. Currencies such as KRW, TWD, SGD, and MYR are supported by strong external balances, technology exports and relatively resilient domestic fundamentals. In particular, ongoing AI and semiconductor demand remains supportive for these currencies, while SGD should also continue to benefit from macro stability and relatively defensive characteristics. Rising US business investments in computers and peripherals suggest that the tech upcycle could still persist.