Three weeks after assuming office, on 22 April 2016, Vietnamese President Tran Dai Quang was quoted as saying that Japan is ‘one of Vietnam’s most important cooperative partners’. The importance given to the Vietnam–Japan relationship, on both sides, has increased with the changing power configuration in Asia.
The US dollar remains under pressure. It is off for the third day against the yen and slipped below JPY109 for the first time in a little more than two weeks. The Nikkei struggled to cope with the foreign exchange developments, lost 2.3%, the most in a month, after gapping lower. At JPY108.50, the dollar would have given back 50% of its rally off the May 3 low near JPY105.50. Below there, the JPY107.80 is the 61.8% retracement.
The media circus surrounding Donald Trump’s bid for the US presidency is briefly switching from America to the £200m reopening of a golf resort in south-west Scotland. Trump Turnberry, as it has been renamed, boasts a remodelled course and a substantially upgraded five-star hotel and spa. The man himself is reportedly to fly in for a grand ceremony on June 24.
A gloomy outlook is enveloping the world’s economies. There are concerns that countries are failing to sufficiently focus on long-term policy responses to reverse the decline in global growth. Some are even arguing that the global growth slowdown may be permanent. However, for developing Asia, this downbeat view is clearly overstated.
The South Korea–China Free Trade Agreement (FTA), which entered into effect in December 2015, has proved disappointing. The pact excludes too much economic activity and does too little to propel growth in both countries. As a result, South Korea and China have missed an opportunity to set a new precedent for East Asian economic integration.
Australia, as in the past, has the potential to play a role in shaping the Asian economic cooperation agenda in a way that deepens regional economic linkages and lifts the growth potential of Asian economies. As the world’s economic gravity continues to shift to Asia, Australia will benefit greatly from being an integral part of Asia’s economic transformation.
When it comes to forecasting elections, opinion polls that are often proved wrong bombard the public. Meanwhile, the betting markets get it right every time, so when they say Hillary Clinton will score a comfortable win over Donald Trump, we can take it as read.
The US dollar is broadly mixed. The main narrative of increased prospects for a Fed hike in June or July has been pushed off center stage as the market reacts to local developments as investors await from US economic data. Ostensibly, the data will determine whether the Fed raises rates in June or July.
On the other hand, despite the Fed’s data dependency, we argue that the determining factor is the Fed’s risk assessment. In particular, we accept at face value the official recognition of the risks posed by the UK referendum.
The US dollar bottomed against nearly all the major currencies on May 3. The hawkish April FOMC minutes that began swaying opinion about the prospects for a summer rate hike were not published until two weeks later, and the confirmation by NY Fed President Dudley was not until May 19.
The US dollar was mostly firmer over the past week. There were two exceptions among the major currencies: Sterling and the Canadian dollar.
Many linked sterling’s outperformance (+0.8%) to a growing sense that the UK will vote to remain in the EU, despite angst reflected in the elevated cost of insurance (one-month options). The Canadian dollar (+0.7%) was helped by oil’s flirtation with $50 a barrel and a central bank that was perhaps less dovish than some expected.
