Risk is rallying — here’s what’s happening in FX

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Good morning!

There are a few moves in FX as of 8:00 a.m. EST on Tuesday, April 19.

Here’s the scoreboard:

  • The Japanese yen is weaker by 0.6% at 109.44 per dollar, continuing its drop from a 17-month high of 107.63 reached last week. “Buoyant global risk appetite driven by the Fed’s broadened mandate reducing the global USD shortage has put Japan’s JPY-supportive repatriation flow to hold for now. USDJPY has the potential for a short-term rebound to 112.50,” wrote a Morgan Stanley team led by Hans W. Redeker.
  • The British pound is stronger by 0.6% at 1.4356. “GBP’s risk premium has remained high for very good reasons, mostly associated with the upcoming June 23 EU referendum. However, with risk premia melting away elsewhere, we think GBP will look increasingly supported,” argued Redeker.
  • The Australian dollar is stronger by 0.6% at .7795 after the minutes from the RBA’s April meeting said that while “continued low inflation would provide scope to ease monetary policy further,” there remain “reasonable prospects for continued growth in the economy.” Or as Deutsche Bank’s Phil Odonaghoe noted: “In other words, any change in the policy stance remains dependent on ‘new information,’ and there seems no great urgency for a change in that assessment.”
  • The euro is stronger by 0.2% at 1.1333 after Germany’s ZEW economic sentiment climbed to 11.2 in April, up from March’s 4.3, and above expectations of 8.0. “Surprisingly positive economic news from China seem to have improved the sentiment amongst financial market experts,” said Professor Sascha Steffen, Head of the Research Department “International Finance and Financial Management” at ZEW. “On balance, however, the continued poor growth in China and other important emerging markets continues to be a burden for the German export industry.”
  • The Brazilian real is little changed at 3.6122 per dollar. Notably, although many analysts have suggested that Brazilian markets have gotten a boost in the past few months due to on-going speculation that President Dilma Rousseff could be forced out of office, others have suggested that it might have more to do with commodities.
  • The South Korean won ended stronger by 1.2% at 1136.28 after the Bank of Korea held its key interest rate at 1.50% for the 10th straight month and lowered its GDP forecast to 2.8% from 3%. However, “with the economy still in a fragile state, monetary policy loosening looks to be on the cards in the coming months,” writes Capital Economics’ Krystal Tan in a note. “The change to four of the BoK’s seven monetary policy board members after today could be a game-changer.”
  • The dollar index is weaker by 0.2% at 94.34. Housing Starts and Building Permits will be out at 8:30 a.m. EST.

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