The US Dollar (USD) fell, alongside decline in UST yields. FX volatility eased further. DXY was last at 104.46 levels. AXJ FX also firmed this morning, with THB leading gains, OCBC’ FX analysts Frances Cheung and Christopher Wong note.

Markets seem volatile for now

“Markets appear to be unwinding Trump trades and re-pricing in optimism of China stimulus as NPC concludes later today. Market chatters of stimuli between RMB10-15tn have been making its rounds but devil may be in the details. Any disappointment here could re-introduce downward pressure to AXJ FX sensitive to RMB. That said, we believe the NPC meeting is likely to factor in US election risk premium and Chinese policymakers should still be determined on delivering support measures to mend the economy and repair sentiment.”

“Trump's threat on tariff is clearly one of the biggest risks that markets are concerned about, but we do not know how long it takes for those policies to be in place after all President inauguration only takes place on 20th Jan. Tariff risk and Trump policy uncertainty may keep USD supported on dips but in the event of a delay to implementing tariffs or even in the scenario it doesn’t materialise, then further unwinding of Trump trade may also be likely.”