Asian equities rise, US dollar dips

Asian equities move higher on default recovery hopes

With China and Hong Kong away today, the rest of Asia has gasped the global recovery mantle and powered higher, after Wall Street finished on a similarly positive note on Friday, with US futures moving higher this morning.

On Friday, the S&P 500 0.47%, the Nasdaq climbed 0.50%, with the Dow Jones lagging, gaining only 0.10%. In Asia though, all three index futures have risen by around 0.40% as the Biden stimulus/vaccine recovery trade continues to be the one ring that rules them all.

The Nikkei 225 made another 30-year high today, touching 30,000.00 before retreating, but is still an impressive 1.30% higher on the day. The Kospi has also rallied strongly, rising 1.40%. Singapore has climbed 0.35% ahead of tomorrow’s budget, with Kuala Lumpur up 0.45% and Jakarta’s 0.35% higher. Australian markets are also claiming following trade winds, boosted by high commodity prices. The ASX 200 is up 0.95%, while the All Ordinaries has gained 0.85%.

The optimistic tone is likely to continue into Europe unless we get some negative headline surprises.

The US dollar retreats in Asia

The dollar index finished almost unchanged on Friday, as the rise in US yields offset rotational flows on global recovery sentiment. In Asia though, the US stimulus-led recovery hopes have reasserted themselves, with the dollar index falling 0.11% to 90.31 today.

The gains against the greenback have been most notable in the more cyclical developed market space. GBP/USD has risen 0.40% to 1.3900, and it seems likely to test 1.4000 this week. The impressive pace of the UK vaccination programme versus Europe lifting hopes of an earlier recovery.

On the same theme, the cyclical AUD/USD has risen 0.30% to 0.7785, NZD/USD has risen 0.28% to 0.7240 with USD/CAD falling 0.20% to 1.2668. The chart structures for AUD, NZD and CAD are all constructive, and all three are set for gains this week as long as the stimulus/recovery narrative remains intact.

Asian currency trading has been muted by the China holiday, but regional currencies have also booked gains on the recovery narrative. Offshore USD/CNH has fallen 0.20% to 6.40.70 and the Indonesian rupiah, Malaysian ringgit and Singapore dollar are all higher this morning as well.

With US markets closed today, the US dollar will continue to remain on the back foot. Markets will continue concentrating on rotation out of the greenback, and into global economic expansion positioning.

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