16 Jan 2014
Flash: Capital flow outlook - Westpac
FXstreet.com (Bali) - As we progress through February, according to Jonathan Cavenagh, FX Strategist at Westpac, there is scope for the capital flow environment to turn more positive.
Key Quotes
"By this stage we should see our US data surprise index topping out, just as our Asian data pulse index finds a base. If this contributes to a pull back in US yields, it should encourage some flows back into local bonds."
"Inflows into local equities should also be supported by a shift in relative data momentum between Asia and developed markets."
"Our preferred trades under such a scenario would be to short USD/KRW and USD/INR, which, in our view, stand to benefit the most from an improvement in Asian capital inflow sentiment."
"We would look to sell rallies in 1 month USD/KRW back towards the 1075 region, while for USD/INR, equivalent levels would be around the 62.20/30 region. IDR and MYR are also likely to benefit under such a scenario, although we would prefer to play longs in these currencies on an intra-Asia basis (specifically short THB/IDR and short SGD/MYR)."
Key Quotes
"By this stage we should see our US data surprise index topping out, just as our Asian data pulse index finds a base. If this contributes to a pull back in US yields, it should encourage some flows back into local bonds."
"Inflows into local equities should also be supported by a shift in relative data momentum between Asia and developed markets."
"Our preferred trades under such a scenario would be to short USD/KRW and USD/INR, which, in our view, stand to benefit the most from an improvement in Asian capital inflow sentiment."
"We would look to sell rallies in 1 month USD/KRW back towards the 1075 region, while for USD/INR, equivalent levels would be around the 62.20/30 region. IDR and MYR are also likely to benefit under such a scenario, although we would prefer to play longs in these currencies on an intra-Asia basis (specifically short THB/IDR and short SGD/MYR)."