Comet on Thanksgiving and Month End Records For FX
For the past fortnight, I have been waking at 430 am to try and catch a glimpse of Comet Ison on the eastern horizon and I managed to learn a thing or two about Singapore’s weather.
No chance of cloudless skies ! of course, Singapore has 171 thunderstorm days a year and the highest rate of lightning activity in the world with more strikes per sq mile than any or many other places. Source : http://www.weather.gov.sg/wip/web/home/lightning
And as it approaches its perihelion tomorrow, in other words its closest encounter with the Sun, there is a chance it may disintegrate completely before it comes closest to Earth on 26 Dec which happens to be a big day for me, and even more comet dust for Earth to fly through come 14 Jan 2014. http://www.nbcnews.com/science/comet-ison-solar-probe-sights-storm-coming-2D11663523
Not that most of the world cares because today is Thanksgiving, the start of Hanukkah and turkey time before month end on Friday and we will see market moves that are plain unpredictable and even market professionals openly admitting that they are looking for clues.
Month end rebalancing models are expecting USD selling which has not happened but for mini reversal 2 days ago that reversed again yesterday to bring us back to a stalemate.
Taken from Citi 3 days ago.
“Relative performance of equities dominates the signal. US equities have out-performed most of their global counterparts and investors who hedge currency risk will need to sell USD to increase hedges. The signal is weaker for USDJPY, because the good performance of Japanese equities may also trigger foreign selling of JPY. Signals to sell USD against European currencies, AUD and NZD are stronger.”
For the G10
“G10 – USD and AUD selling while EUR, JPY and SEK buying are the strongest G10 flows of last week. Clients continue to reduce underlying positions into year-end. Only GBP has not corrected.”
And even more 2 days ago.
“Unusually large performance differentials between surging US equities and sluggish returns elsewhere mean the model expects outflows from US equities with signal strength close to the historical average.
The vast majority of the flows should be destined for global bonds, where CEEMEA and Latin America could see larger than average flows.
On the FX front, asset rebalancing points to flows out of the USD and into nearly every other currency, especially into EUR, GBP, and JPY.”
We have seen 5 year record highs in EURJPY and a 20 year high CHFJPY which is giving rise to the belief that large funding trades are going through. AUDJPY is not so lucky this time.
Skandis are recovering ground since Monday but the IDR is going through the roof again (4 year high) even though the protests are in Thailand and the Bank of Thailand cut rates yesterday.
We are seeing decade highs vs the SGD for the IDR, THB, MYR and INR.
Like Comet Ison, I think we are dancing perilously on the perihilion in the markets. No news is bad news anymore because bad news is QE, good news is good news and there will be no more failures with more bailouts (Monte de Paschi yesterday). And we continue to fish for clues to justify what is going on.
No one is particularly worried about Asia at the moment since we have the super powerful Chiang Mai Initiative Multilateralisation fund. And another Asian crisis is out of the question.
If we really believe in that, then perhaps its time to load up on some Asians (IDR, INR, MYR, THB and JPY) today ? (and hedge by shorting the S&P 500 ?)
Happy Thanksgiving !