本文发表在 rolia.net 枫下论坛USDCAD (1.2600) The USD is weaker for the second straight session, falling noticeably against all of its G10 peers. Equity markets continue to rally following yesterday’s soaring gains (the Dow finished nearly 11% higher), which is giving a nice lift to NZD (news of a swap facility between the Feb and the RBNZ may also be helping). CAD is also performing well as commodity prices rebound, building on yesterday’s 1.7% gain and taking USDCAD back to 1.2600. An improvement in credit conditions – Libor rates are falling gradually and the Fed’s commercial paper liquidity initiatives appear to be helping – may also be putting some pressure on the USD, assuming the scramble out of USD-funded positions has moderated over the past couple of days. However, the catalyst for yesterday’s equity gains appeared to be some combination of Fed rate cut anticipation and a perception of undervaluation in certain sectors, as opposed to some piece of tangible, compelling good news. In fact, the news on the economy was most grim, with consumer confidence plunging to a record low and US home prices falling at their fastest m/m pace in four months. Of course, equity markets traditionally bottom well before the general economy; however, considering the amount of bad economic and earnings news that lies ahead, we are doubtful over how far this rebound will run. The USD was overdue for a pullback, and the stars have also aligned for a rebound in carry. However, we think this move will eventually run out of steam and would look for opportunities to short carry again once it runs its course (today the risk would seem to be some carry “selling of the fact” once the FOMC renders its verdict). As for today’s widely-expected 50bp cut from the FOMC (Scotia’s call as well), Financial Times Fed insider Krishna Guha argued yesterday that “senior policymakers do not think that reducing the federal funds rate from its already low level of 1.5% will have a big effect on financial markets or the US economy”. Moreover, “they think that in the US monetary policy is now a secondary issue, and the main tools to fight the economic downturn are government capital injections and asset purchases, plus giant central bank liquidity operations including borderline unsecured loans.” Indeed, yesterday saw an encouraging increase in longer-term (i.e. +80-day) commercial paper issuance, which is a consequence of the Fed’s Commercial Paper Funding Facility that began operating this week. So why are policymakers so willing to spend this ammunition? Likely because they want to shepherd other central banks down the same path (note that BoJ easing expectations have begun swirling), and forestall garment-rending in the equity market. They may as well anyway, considering effective Fed funds has averaged well below 1% for the past month. Normally, the reduction of a country’s administered interest rate ever closer to the zero boundary would augur poorly for its currency (witness the weakness in JPY these past many years). However, a low interest rate is a blessing when the carry trade is unraveling. In addition, the majority of the remaining G10 central banks have more room to ease than the Fed. Consequently, today’s rate cut should be a USD negative only insofar as it sustains the equity rally and gives a further lift to the carry trade. One piece of good news over the past day for the USD is that foreign central banks still exhibit strong interest in US Treasury debt. Yesterday’s $34bn 2-year Treasury auction went reasonably well, judging by the 2.49 bid-cover ratio and strong central bank interest. Indirect bidder participation (a proxy for central banks) leapt to 42% – its highest since April 2007.更多精彩文章及讨论，请光临枫下论坛 rolia.net