Halister News

(Bloomberg) -- Any potential early tapering by ECB indicates withdrawal of liquidity which Asian currencies have been benefiting from, Standard Chartered Bank Asia FX strategist Eddie Cheung says.

• Potential retrace would impact equity-driven currencies in Northeast Asia, while bond-flow driven currencies such as MYR would also be affected
• Tapering would be a natural next step, but ECB decision would be data dependent, and would watch next meeting
• Too early to price in ECB tapering potential as the central bank is still likely to extend QE
• NOTE: KRW falls as much as 0.8% today, most since Sept 12, to 1117.10 per dollar; now down 0.6% at 1114.05
  • MYR declines as much as 0.5% today
  • ECB would gradually wind down bond purchases as QE approaches its end, Bloomberg reports, citing officials from the European central bank who declined to be identified
  • Officials didn’t exclude that QE could be extended past end-date of March 2017 at the full pace of 80 billion euros a month.
  • Next policy meeting scheduled for Oct. 20

(Bloomberg) -- ECB may want to steepen yield curve like BOJ is trying to do rather than simply tapering bond purchases, says Kuniyuki Hirai, head of trading at MUFG Union Bank.

• ECB could shorten durations of bonds that it buys to steepen the curve, New York-based Hirai says in interview; a flatter yield curve will pressure earnings of European banks even further
• ECB could cut interest rates further while shortening duration; if it does, then EUR won’t be bought much
• NOTE: ECB will probably gradually wind down bond purchases before conclusion of quantitative easing, according to euro- zone central-bank officials

(Bloomberg) -- USD/KRW 1-month NDF rose to 1,116.85 overnight as Treasuries and stocks fell on Bloomberg story that ECB will likely taper its bond purchases before QE ends.

• The NDF’s level compares with onshore close for USD/KRW at 1,107.78

(Bloomberg) -- Citi recommends closing tactical 10Y swap spreads widener recommended on Sept. 23 and initiating spread tightener “to position for seasonality in issuance, selling pressure from reserve managers, and wider budget deficits,” strategist Ruslan Bikbov says in note.

• Seasonal analysis suggests spreads tend to tighten in early October ahead of looming “pent-up” supply
• Reserve manager selling to shorten duration and wider deficit expectations ahead of presidential election could help drive tightening
• Spread tightener initiated at -15.65bp, targeting -20.5bp, stop-loss at -13bp
• Risks to trade include widening FRA/OIS due to money market fund reform and dollar funding pressure on European banks