From last couple of recent trading sessions, the dollar index has gained nearly 2%. After a long interruption in bull rally of dollar, now the rally looks set to resume and it could be sturdy ever.
But its surge since last Friday has many experts pondering the USD may have turned the table and will begin leading back again. This is fortified by the prospect of Fed rate hikes as well.
We think the markets are rushing to get long dollars again, the FX market is running ahead of rates again.
It's a little bit of a concern, we need support from higher rates to keep the dollar moving higher. But just about now, we think it's about getting off the sidelines to get back into the long dollar trade.
On the contrary, In Japan, industrial production is produced 1% growth in April of 2015 over the previous month, rebounding from a 0.8% drop in March and in line with economists' expectations. This is recovered after strong volatility previously. In contrast, inflation in Japan is eased further to 0.4%.
While Korean retail sales MoM figures rose to 1.6% from previous numbers at -0.5%. China seems to bounce back with their infrastructure projects (especially investment of $900 bln in Silk Road project).
Well, India on YoY basis GDP grew to 7.5% from previous 6.9%, while inflation is under control at 4.9% which is way below from previous 8.3%, CAD also reduced drastically to 1.7% of GDP from previous 4.7% of GDP.
So, it is going to be a tug of currency war between dollar and Asian counterparts. In upcoming posts, on hedging front we recommend bullish strategies on dollar against Asian currency baskets.
