Insights.abnamro.nl/en

FX Weekly

31 March 2016

USD out of favour

Dovish comments from Fed Yellen weigh on the USD

Currently, financial markets appear to be biased towards a weaker US dollar.

Comments from Fed officials have been playing a role in the movements of the

dollar. But the more dovish comments have had a higher impact. Indeed, the more

dovish comments from the Fed Chair Yellen this week have resulted in a weaker

dollar. Once more the rally in USD/JPY ran out of steam above the 113.00 level. We

think that it will be difficult for USD/JPY to clear 113-115 level. Also in EUR/USD the

dollar upside seems to be capped. EUR/USD has been very resilient to positive US

dollar news, while any negative dollar news is widely used to weaken the dollar. In

short, the upward pressure in EUR/USD is increasing. If US economic data come in

somewhat below expectations, EUR/USD could move above 1.15.

FX performance Major FX

In % with USD as basis

Source: Bloomberg

Currencies of commodity exporting countries (NZD, CAD, NOK, ZAR, MXN, and

BRL) have outperformed, especially if they have attractive yields. The fact that the

weaker US dollar has not pushed commodity prices to new highs only dampened the

upside in these currencies somewhat. This signals that the underlying sentiment in

0

1

2

3

4

NZD NOK CAD SEK AUD EUR GBP CHF JPY

Georgette Boele

Co-ordinator FX & Precious Metals

Strategy

Tel: +31 20 629 7789

georgette.boele@nl.abnamro.com

Roy Teo

Senior FX Strategist

Tel: +65 6597 8616

roy.teo@sg.abnamro.com

Group Economics Macro & Financial Markets Research

Dovish comments from Fed Chair Yellen weigh on the US dollar

Dollar has been weak across the board with commodity FX in favour

Weaker US data will likely weigh on the dollar going forward

RBA to keep OCR unchanged, carry trades trend to persist

2

FX Weeklyy - USD out oof favour - 3

emerg

into fo

in coun

banks

develo

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Source:

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0

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3

4

5

97

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102103

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31 March 20

ging market an

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in these count

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th USD as basis

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n currencies g

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Dec-14 Mar-1

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nd commodity

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tries could focu

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also doubt that

en that gains in

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-15 Mar-16

prove as carry

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currencies gain

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3

FX Weeklyy - USD out oof favour - 3

export

Zealan

weeks

AUD/U

Level

Source:

ABN

Source:

ABN

Source:

0.6

0.7

0.7

0.8

0.8

0.9

0.9

1.0

J

EUR/USDUSD/JPYEUR/JPYGBP/USDEUR/GBPUSD/CHFEUR/CHFAUD/USDNZD/USDUSD/CADEUR/CADEUR/SEKEUR/NOKEUR/DKK

USD/CNYUSD/CNHUSD/INRUSD/KRWEUR/KRWUSD/SGDUSD/THBUSD/TWDUSD/IDRUSD/RUBUSD/TRYUSD/ZAREUR/PLNEUR/CZKEUR/HUFUSD/BRLUSD/MXNUSD/CLP

31 March 20

t. The current

nd dollar (NZD

s.

USD; Carry tr

Bloomberg

AMRO major

ABN AMRO Grou

AMRO emerg

ABN AMRO Grou

65

70

75

80

85

90

95

00

Jan-14 Jul-

AUD/U

Financ

31-MarD 1.1365Y 112.36

127.69D 1.4381P 0.7902F 0.9634F 1.0948D 0.7677D 0.6926D 1.2947D 1.4714K 9.2432K 9.4256K 7.4515

31-MarY (onshore) 6.46H (offshore) 6.46

66.2W 1,143W 1,302D 1.34B 35.15D 32.40

13,239B 67Y 2.82R 14.74

N 4.26K 27.05F 314L 3.62N 17.20P 673

016

carry trade th

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rade index

r currency fo

up Economics

ging market c

up Economics

-14 Jan-15

USD (lhs)

cial conditions As

Q2 2016 Q3 2016 Q1.15 1.15113 114130 1311.40 1.420.82 0.810.96 0.961.10 1.100.76 0.760.68 0.681.30 1.281.50 1.479.25 9.259.25 9.007.46 7.46

Q2 2016 Q3 2016 Q6.55 6.606.55 6.6066.5 67.0

1,165 1,1651,340 1,3401.36 1.38

35.00 35.0032.50 32.80

13,200 13,40066 64

2.85 2.8015.00 14.754.30 4.30

27.00 27.00310 310

3.60 3.5517.25 17.00

670 660

eme is likely t

ards 0.7850 an

recasts

currency fore

Jul-15 J

ia carry trade inde

Q4 2016 Q1 2017 Q2 1.15 1.15115 114132 131

1.48 1.500.78 0.770.96 0.971.10 1.110.76 0.770.68 0.691.26 1.251.45 1.449.25 9.258.75 8.507.46 7.46

Q4 2016 Q1 2017 Q2 6.70 6.756.70 6.7567.0 67.0

1,165 1,150 11,340 1,323 11.40 1.38

35.00 34.80 333.00 32.80 3

13,500 13,400 1360 59

2.75 2.7514.50 14.25 14.25 4.20

27.00 26.50 2305 3003.50 3.45

16.75 16.50 1650 640

to continue su

nd 0.7200, res

Index leve

ecasts

165167169171173175177179181

Jan-16

ex (rhs)

2017 Q3 2017 Q4 2011.15 1.15 1.112 110 10129 127 121.52 1.54 1.50.76 0.75 0.70.97 0.98 0.91.12 1.13 1.0.78 0.79 0.80.70 0.71 0.71.24 1.23 1.21.43 1.41 1.39.00 9.00 8.78.50 8.25 8.27.46 7.46 7.4

2017 Q3 2017 Q4 206.80 6.80 6.86.80 6.80 6.866.0 65.5 65

1,140 1,130 1,121,311 1,300 1,281.36 1.35 1.3

34.60 34.40 34.032.50 32.20 32.03,300 13,200 13,00

58 57 52.75 2.75 2.7

14.00 13.75 13.54.15 4.15 4.

26.25 26.00 25.5300 295 293.40 3.35 3.3

15.75 15.50 15.2630 620 60

upport the AUD

spectively in th

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