Risk appetite has continued on an improving trend since the end of August.
A mixture of easing tensions surrounding Syria and stronger data globally have helped to shore up sentiment. US Treasury yields have lost some upside momentum as tapering worries have eased, providing relief to risk assets including emerging market currencies.
Therefore, the Dollar continues to lose ground and looks susceptible to additional slippage in the days ahead. Eurozone industrial production will be the main data releases of note today.
In Asia, central banks in Korea, Philippines and Indonesia will follow the RBNZ overnight with policy decisions. No change in policy is expected from any of the central banks. Indeed, the recent firming in the rupiah suggests that there will be less urgency for Indonesia’s central bank to hike rates to protect the currency.
The Indian rupee has been the best performing currency since the start of the month as portfolio capital has returned. In the near however, the INR looks may struggle to breach the 63.00 level versus US Dollar.
Swiss officials continue to defend the CH Franc ceiling and show no sign of eliminating it any time soon.
Wise Money agrees that the Franc remains overvalued but the reality is that Swiss economic data has shown some improvement while foreign demand for CHF assets has eased in the wake of improving sentiment towards peripheral Europe as reflected in reduced Swiss banks’ foreign liabilities.
The SNB is also not intervening to hold back CHF gains, with reserves growth flattening out over recent months. Although any reversal of flows from Switzerland will prove sticky the bias for EUR/CHF will be higher. In the near term the currency pair may run into resistance around the top of its recent range around 1.2438.