The argument between dollar weakness and strength will be most strongly played out in USDJPY as BOJ would remain stern to prevent JPY appreciation unless the two policies converge and a trend emerges.
In continuation to my doubts on US being able to create factory jobs is the dichotomy between US median factory wages and US median household income. US median factory wages is USD 22k per year while median household income is USD 56k. Assume that in a household there are two factory workers the median factory job household income comes to around USD 44 k. Thus with the addition of manufacturing jobs US wages should fall which is a non starter unless degrowth becomes policy. Conversely manufacturing in the US will need increasing wages and higher costs which should be inflationary. Add to this near full employment and the future becomes even more difficult to comprehend. But in the near term Trump’s policies should be inflationary in the US resulting in higher than expected rate hikes and therefore USD strength! But then higher cost products should result in growth peaking out sooner than later, i.e., in the medium term.
USDINR 1m NDF is trading left by 3 p as compared to flat yesterday while KRW has appreciated 0.5% along with mild dollar weakness since yesterday. Equity markets are in the red but the correlation between currencies and equities has become low as dollar policy takes centre stage. Yesterday overnight USDINR traded at 67.75 and with budget tomorrow, euphoria should precede. CMP 67.87, Range 67.95 – 67.72.
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