Latest news with #FrancesCheung
Free Malaysia Today
2 days ago
- Business
- Free Malaysia Today
FX hedging cost drop sparks debate on Asia bond defence bets
Three-month forward implied yields for dollar-won have fallen to around 1.7% this week, the lowest level in more than two years. (EPA Images pic) SINGAPORE : A decline in currency hedging costs across Asia is fueling a debate among bond investors on whether they should fortify their portfolios with cheap protection or let the opportunity slide. Three-month forward implied yields for dollar-won have fallen to around 1.7% this week, the lowest level in more than two years, signaling plummeting hedging costs for South Korean bonds. The same gauges for currencies in Thailand, Indonesia, China and India are also below their one-year averages, according to Bloomberg calculations. Currency hedging costs are falling at a crucial time for investors funding their holdings in Asia with dollars due to elevated market volatility fueled by US policy whiplash and de-dollarisation concern. However, investors with the stomach for risk could also look for any further declines in the dollar as it would enhance returns on their local currency assets. Dollar or euro-funded investors would be more comfortable investing in Asia local-currency fixed income with currency hedges, according to Frances Cheung, head of FX and rates strategy at Oversea-Chinese Banking Corp. 'There has been robust foreign inflows into China's Negotiable Certificates of Deposit (NCD) on the pick-up after hedging, and even if hedged returns narrow further after this, flows may still come in if diversification is the goal,' she added. An investor who hedges a long position in a one-year China NCD with a 12-month dollar-offshore yuan forward will pocket a return of 52 basis points over US SOFR, or 4.85%, according to Bloomberg calculations. 'Lower hedging costs or higher yield pickup will remain a tailwind for Asia local-currency government bonds, and is the most attractive in China and Thailand,' said Stephen Chiu, chief Asia FX and rates strategist at Bloomberg Intelligence. 'Hedging costs have fallen as US front end rates remain high, while Asia front end rates are down on easing expectations,' he added. Central banks in Indonesia, India, Thailand and South Korea have lowered their key rates by a cumulative 175 basis points so far this year while the Federal fund rate has remained unchanged over the same period. A drop in forward-implied local currency yields relative to American rates makes it cheaper for US-based investors to go short Asian currencies and long the dollar for hedging against potential foreign-exchange losses on their bond portfolios. The dollar-baht three-month forward implied yields are two standard deviations below the one-year average. The same gauge for Indonesia, China and Taiwan stands at -1.40, -1.36 and -0.53 respectively. Bank of Korea trimmed policy rates by 25 basis points today as was widely expected, while flagging the likelihood of more interest rate cuts to come, which is likely to further drag down hedging costs. May inflation data from Thailand, Indonesia, the Philippines and South Korea early next month will also set the tone for monetary policies in those nations and therefore their currency hedging costs.
Hindustan Times
3 days ago
- Business
- Hindustan Times
China stocks look to snap five-day losing streak as US court blocks Trump tariffs
SHANGHAI, - Mainland China and Hong Kong stocks advanced on Thursday as sentiment improved after a U.S. trade court blocked President Donald Trump's so-called reciprocal tariffs that had weighed on global trade and roiled financial markets. Key Chinese stock indexes rebounded and looked set to snap their five-day losing streak, while the U.S. dollar rallied and gold sank in overseas market, as risk appetite sharply changed following the court decision. ** A U.S. trade court blocked President Donald Trump's tariffs from going into effect in a sweeping ruling on Wednesday that found the president overstepped his authority by imposing across-the-board duties on imports from U.S. trading partners. ** At the midday break, the Shanghai Composite index was up 0.72% at 3,363.97 points, while the blue-chip CSI300 index was up 0.68% 3,862.44 points. If both indexes retain all the gains at the close, they will post their first daily gain since May 21. ** The smaller Shenzhen index was up 1.23%, the start-up board ChiNext Composite index was higher by 1.16% and Shanghai's tech-focused STAR50 index was up 1.25%. ** In Hong Kong, the benchmark Hang Seng Index was up 0.65% at 23,408.36 points, while the Chinese H-share index listed in the financial hub, the Hang Seng China Enterprises Index rose 0.68% to 8,501.15 points. ** Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.41% while Japan's Nikkei index was up 1.58%. ** However, gains in Chinese shares were capped as uncertainty around bilateral relations between Washington and Beijing still lingered, traders and analysts said. ** "The ruling gives an interim boost to risk sentiment which saw equity futures, bond yields and the dollar higher," said Frances Cheung, head of FX and rates strategy at OCBC Bank. "Development on tariff and trade relation remains fluid. Investors may be reluctant to load heavy positions on either side of the trade." ** The U.S. has ordered companies that offer software used to design semiconductors to stop selling to China without first getting an export license, sources told Reuters. ** However, Beijing-based Empyrean Technology Co , which is considered to be China's primary alternative to the U.S. giants like Cadence, Synopsys, and Siemens in the electronic design automation market, jumped 11.9% in morning deals. ** U.S. Secretary of State Marco Rubio announced on Wednesday the United States will start "aggressively" revoking visas of Chinese students, including those with connections to the Chinese Communist Party or studying in critical fields.
Business Times
06-05-2025
- Business
- Business Times
Hong Kong ramps up FX intervention to defend currency peg
[MELBOURNE] Hong Kong authorities ramped up sales of the local dollar as the greenback's slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (S$10.1 billion) of the city's currency, according to an alert sent on its Bloomberg page on Tuesday (May 6) in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city's authorities to limit the currency's moves within its 7.75-to-7.85 per US dollar trading band. Asian currencies are clocking in unprecedented gains on hopes the world's two largest economies will reach a truce on trade and as doubts over US exceptionalism pummel the US dollar. Heavy sales of the local dollar by the HKMA helped dampen Hong Kong's borrowing rates that were elevated amid demand for the currency to subscribe shares of Contemporary Amperex Technology Ltd, which is expected to be the city's biggest listing in years. Lower borrowing costs may also help support Hong Kong's economy in the face of US tariffs. The HKMA's Hong Kong dollar sales 'may help buffer potential liquidity tightness at an upcoming IPO, together with other inflows,' said Frances Cheung, head of FX and rates strategy at Oversea-Chinese Banking Corp. She sees the currency peg resulting in a relatively soft Hong Kong dollar compared with peers in times of greenback weakness. The Hong Kong dollar's exchange rate has been on a strengthening bias recently, mainly driven by an increase in market carry-trade activities and equity-related demand for Hong Kong dollars, HKMA chief executive Eddie Yue told lawmakers. The local financial market has operated in an orderly manner, he said. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Demand for Hong Kong dollars in the capital market has been high of late as Chinese investors poured money in Hong Kong stocks this year. Currency conversions related to dividend payments by Chinese companies listed in Hong Kong added to demand for the local currency. Before Friday, the last time the HKMA intervened to cap the currency's gains was in 2020. In comparison, it has stepped into the market in 2022 and 2023 to put a floor under the currency when it threatened to breach the weak end of its trading band. Hong Kong set up the currency peg in 1983 to arrest a plunge triggered by concern over talks to hand over the British colony to China. The trading band was widened in 2005 to what it currently is. The recent HKMA interventions are also expected to drive up its aggregate balance, a measure of interbank liquidity, providing more firepower to authorities to defend the currency in episodes of weakness. The gauge was hovering near the lowest level since 2008, after the HKMA sold US dollars to defend the peg. The accumulated intervention amount this time around is likely to overtake the HK$383.5 billion recorded in 2020 after the Covid outbreak, Bloomberg Intelligence strategist Stephen Chiu and Chunyu Zhang wrote in a note. The one-month Hong Kong Interbank Offered Rate fell to 3.66 per cent on Tuesday following HKMA's interventions, the lowest in two weeks. The recent rally in currencies of trade-dependent Asian economies is causing headaches for policymakers. While currency strength can help attract foreign inflows and make imports cheaper, it may hurt exporters by making their goods less competitive globally. The Taiwan dollar's surge by the most in four decades prompted the island's central bank to say on Monday that it would step into the foreign-exchange market if stability was threatened. As for the Hong Kong dollar, Citigroup expects HKMA interventions to continue. 'We expect further intervention on the strong side of the trading band given greenback weakness trend may have more room to run,' strategist Adrienne Lui wrote in a note. BLOOMBERG
Yahoo
06-05-2025
- Business
- Yahoo
Hong Kong Ramps Up FX Intervention to Defend Currency Peg
(Bloomberg) -- Hong Kong authorities ramped up sales of the local dollar as the greenback's slide threatened the foreign-exchange peg. The Battle Over the Fate of Detroit's Renaissance Center NYC Real Estate Industry Asks Judge to Block New Broker Fee Law NJ Transit Strike Would Be 'Disaster' for Region, Sherrill Says Iceland Plans for a More Volcanic Future Vail to Borrow Muni Debt to Ease Ski Resort Town Housing Crunch The Hong Kong Monetary Authority sold a record HK$60.5 billion ($7.8 billion) of the city's currency, according to an alert sent on its Bloomberg page Tuesday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city's authorities to limit the currency's moves within its 7.75-7.85 per dollar trading band. Asian currencies are clocking in unprecedented gains on hopes the world's two largest economies will reach a truce on trade and as doubts over US exceptionalism pummel the dollar. Heavy sales of the local dollar by the HKMA helped dampen Hong Kong's borrowing rates that were elevated amid demand for the currency to subscribe shares of Contemporary Amperex Technology Co. Ltd, which is expected to be the city's biggest listing in years. Lower borrowing costs may also help support Hong Kong's economy in the face of US tariffs. The HKMA's Hong Kong dollar sales 'may help buffer potential liquidity tightness at an upcoming IPO, together with other inflows,' said Frances Cheung, head of FX and rates strategy at Oversea-Chinese Banking Corp. She sees the currency peg resulting in a relatively soft Hong Kong dollar compared with peers in times of greenback weakness. The Hong Kong dollar's exchange rate has been on a strengthening bias recently, mainly driven by an increase in market carry-trade activities and equity-related demand for Hong Kong dollars, HKMA Chief Executive Eddie Yue told lawmakers. The local financial market has operated in an orderly manner, he said. Demand for Hong Kong dollars in the capital market has been high of late as Chinese investors poured money in Hong Kong stocks this year. Currency conversions related to dividend payments by Chinese companies listed in Hong Kong added to demand for the local currency. Before Friday, the last time the HKMA intervened to cap the currency's gains was in 2020. In comparison, it has stepped into the market in 2022 and 2023 to put a floor under the currency when it threatened to breach the weak end of its trading band. Hong Kong set up the currency peg in 1983 to arrest a plunge triggered by concern over talks to hand over the British colony to China. The trading band was widened in 2005 to what it currently is. The recent HKMA interventions are also expected to drive up its aggregate balance, a measure of interbank liquidity, providing more firepower to authorities to defend the currency in episodes of weakness. The gauge was hovering near the lowest level since 2008, after the HKMA sold US dollars to defend the peg. The accumulated intervention amount this time around is likely to overtake the HK$383.5 billion recorded in 2020 after the Covid outbreak, Bloomberg Intelligence strategist Stephen Chiu and Chunyu Zhang wrote in a note. The one-month Hong Kong Interbank Offered Rate fell to 3.66% on Tuesday following HKMA's interventions, the lowest in two weeks. The recent rally in currencies of trade-dependent Asian economies is causing headaches for policymakers. While currency strength can help attract foreign inflows and make imports cheaper, it may hurt exporters by making their goods less competitive globally. The Taiwan dollar's surge by the most in four decades prompted the island's central bank to say on Monday that it would step into the foreign-exchange market if stability was threatened. As for the Hong Kong dollar, Citigroup Inc. expects HKMA interventions to continue. 'We expect further intervention on the strong side of the trading band given greenback weakness trend may have more room to run,' strategist Adrienne Lui wrote in a note. (Updates with HKMA comments in the 6th paragraph.) US Border Towns Are Being Ravaged by Canada's Furious Boycott Made-in-USA Wheelbarrows Promoted by Trump Are Now Made in China Inside the Dizzying Chaos of Running a Freight Business Under Trump 100 Moments You Might Have Missed From Trump's First 100 Days How an Israeli Hostage Negotiator Outsmarts Ransomware Hackers ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Mint
06-05-2025
- Business
- Mint
Hong Kong Ramps Up FX Intervention to Defend Currency Peg
(Bloomberg) -- Hong Kong authorities ramped up sales of the local dollar as the greenback's slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority sold a record HK$60.5 billion ($7.8 billion) of the city's currency, according to an alert sent on its Bloomberg page Tuesday in Asia, after it tested the upper end of its trading band. That adds to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city's authorities to limit the currency's moves within its 7.75-7.85 per dollar trading band. Asian currencies are clocking in unprecedented gains on hopes the world's two largest economies will reach a truce on trade and as doubts over US exceptionalism pummel the dollar. Heavy sales of the local dollar by the HKMA helped dampen Hong Kong's borrowing rates that were elevated amid demand for the currency to subscribe shares of Contemporary Amperex Technology Co. Ltd, which is expected to be the city's biggest listing in years. Lower borrowing costs may also help shield Hong Kong's economy that's vulnerable to US tariffs. The HKMA's Hong Kong dollar sales 'may help buffer potential liquidity tightness at an upcoming IPO, together with other inflows,' said Frances Cheung, head of FX and rates strategy at Oversea-Chinese Banking Corp. She sees the currency peg resulting in a relatively soft Hong Kong dollar compared with peers in times of greenback weakness. Demand for Hong Kong dollars in the capital market has been high of late as Chinese investors poured money in Hong Kong stocks this year. Currency conversions related to dividend payments by Chinese companies listed in Hong Kong added to demand for the local currency. Before Friday, the last time the HKMA intervened to cap the currency's gains was in 2020. In comparison, it has stepped into the market in 2022 and 2023 to put a floor under the currency when it threatened to breach the weak end of its trading band. Hong Kong set up the currency peg in 1983 to arrest a plunge triggered by concern over talks to hand over the British colony to China. The trading band was widened in 2005 to what it currently is. The recent HKMA interventions are also expected to drive up its aggregate balance, a measure of interbank liquidity, providing more firepower to authorities to defend the currency in episodes of weakness. The gauge was hovering near the lowest level since 2008, after the HKMA sold US dollars to defend the peg. The accumulated intervention amount this time around is likely to overtake the HK$383.5 billion recorded in 2020 after the Covid outbreak, Bloomberg Intelligence strategist Stephen Chiu and Chunyu Zhang wrote in a note. The one-month Hong Kong Interbank Offered Rate fell to 3.66% on Tuesday following HKMA's interventions, the lowest in two weeks. The recent rally in currencies of trade-dependent Asian economies is causing headaches for policymakers. While currency strength can help attract foreign inflows and make imports cheaper, it may hurt exporters by making their goods less competitive globally. The Taiwan dollar's surge by the most in four decades prompted the island's central bank to say on Monday that it would step into the foreign-exchange market if stability was threatened. As for the Hong Kong dollar, Citigroup Inc. expects HKMA interventions to continue. 'We expect further intervention on the strong side of the trading band given greenback weakness trend may have more room to run,' strategist Adrienne Lui wrote in a note. More stories like this are available on First Published: 6 May 2025, 12:10 PM IST
