AUD Advances as Risk Appetite Returns in FX Markets
During overnight trading, we saw the currency and equities markets caving out divergent paths. Stock houses in Asia were seen generally lower, apparently taking hints from the #WallStreet Friday’s blood-letting.
Looking ahead into the forex markets, there are indications that most majors will be taking leads from US stock index futures and reflecting a somewhat “risk-on” tone. The commodity backed currency i.e. Aussie dollar is outpaced, while funding currencies like the Euro, Japanese Yen and Swiss Franc are faced with selling pressure.
News coming out of China seems to have aided investor’s sentiment. The largest daily appreciation in month was ushered by the daily Yuan fix, thereby helping to pacify nervous traders that in recent weeks have come to tag devaluation along with risk aversion.
Also making rounds within the trading community is news about the introduction of reserve requirements on offshore Yuan deposits as early as next week. There is no official announcement in respect to this at the moment. This would probably dissuade investors from staking on Yuan weakness by making it costlier to do so.
Over the next 24 hours, we expect to see a relatively quiet data calendar. Markets in the U.S. would be shut for Martin Luther King Jr. Holiday. Looking on the brighter side, this could provide a lush environment for more corrective recovery on the risk appetite side of things, with traders getting ready for the week’s initial bit high-impact data release.