FX Daily: No big bets ahead of FOMC, VND’s depreciation
Markets muted ahead of Wednesday’s FOMC meeting. S&P 500 and Nasdaq Composite initially rallied by 0.4% and 0.3% but ended the session flat. The US Treasury 2Y yield edged up by 2.1 bps to 5.05% while the 10Y yield eased 3 bps to 4.30%. DXY depreciated modestly by 0.1% to 105.2 after a nine-week rally. US Treasury Secretary Janet Yellen did not see any signs that the US economy was at risk of a downturn, pleased that inflation was cooling amid a less overheated labour market. Despite Yellen’s assessment of a soft landing, investors were reluctant to take big bets ahead of a potentially volatile FOMC meeting. Last week, the European Central Bank meeting unsettled markets in two regards. First, the ECB surprised with a hike despite the consensus for a pause. Second, the EUR sold off on the hike, which markets deemed as dovish. Given the relative strength of the US economy vs. the Eurozone, investors are not ruling out a surprise Fed hike or the markets labelling the pause (consensus) as hawkish.
VND depreciated most on Monday by 0.5% to 24,376 per USD, its worst close since early December. VND has depreciated 3.1% YTD this year, comparable to its full-year depreciation of 3.4% last year. Since May, the VND did not buck the currency depreciation in its largest Asian trading partners, i.e., CNY, KRW, and JPY. After four rate cuts to cushion the Vietnamese economy, the VND is vulnerable to a potentially hawkish FOMC meeting this Wednesday. The odds for the Vietnamese economy to meet its official growth target of 6.5% for 2023 have lessened. Real GDP growth slowed from a robust 8% (Asia’s strongest) in 2022 to 3.7% in 1H23 from weakened global demand, the broad anti-corruption campaign, and the property downturn. In August, the World Bank moderated Vietnam’s growth forecast to 4.7% in 2023, 5.5% in 2024, and 6% in 2025. Rating agencies were divided over the troubled property sector. Fitch saw a lesser risk of the property sector’s saddling the government, but S&P reckoned the troubles could spill over into the banking sector.
Quote of the day
“Success seems to be largely a matter of hanging on after others have let go.”
19 September in history
The Royal Thai Army staged a coup d’état against the government of Prime Minister Thaksin Shinawatra in 2006.
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). This report is intended for “Accredited Investors” and “Institutional Investors” (defined under the Financial Advisers Act and Securities and Futures Act of Singapore, and their subsidiary legislation), as well as “Professional Investors” (defined under the Securities and Futures Ordinance of Hong Kong) only. It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
This report has been prepared by a personnel of DBS Bank Ltd who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong by DBS Bank Ltd, DBS Bank (Hong Kong) Limited and DBS Vickers (Hong Kong) Limited.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.