Jobs Data Marked Near-term Trend Changes In Jan And Feb; What About Now?

Mexican Peso:  The Mexican peso was among the weakest of the emerging market currencies, falling about 2.3% against the dollar last week. That offsets about half the interest rate premium earned on a 10-year Mexico peso bond.  The dollar pushed above the 200-day moving average (~MXN21.16) ahead of the weekend, for the first time since last October, and did not look back.  It peaked around MXN21.42. We had suggested a target of MXN21.50. The momentum indicators are getting stretched, and the greenback finished above the upper Bollinger Band (~MXN21.2650).  While MXN21.00 may offer initial support, stronger interest may be seen near MXN20.80.  On a little longer-term outlook, our next target is in the MXN22.00 area.  

Chinese Yuan:  The yuan strengthened steadily from the end of last May through the first couple of sessions this year and since has been in an extremely narrow range.  Indeed, as we have pointed out, the dollar has been in the range set in the first two sessions ever since, with a couple of minor exceptions.  That range was roughly CNY6.43 to CNY6.5150. The dollar approached CNY6.50 before the weekend.  During the National People's Congress, which runs most of next week, officials do not want a headline about yuan weakness.  In the bigger picture, the yuan's stability means that it has appreciated against its CFETS basket. It reached the highest level since June 2018.  The stability of both the yuan and Chinese government bonds gives them a quantitative characteristic that is often desired in portfolio construction.  Among the favorite plays among levered fixed-income accounts continue to be short yen long Chinese bonds (CYB).  

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Read more by Marc on his site Marc to Market.

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