00:00You have an eye on the dollar. Does the dollar turn lower if we get a deal to reopen the
00:04strait?
00:07Yeah, morning, Tom. So we're coming off the back of what's been a rare good month for the dollar.
00:13But most strategists see that this is being a positive month in the midst of a downtrend.
00:18And one of the things that could catalyze that would certainly be a reopening of the strait of Hormuz
00:23and some of that haven money that has been put in the U.S. currency in recent weeks and months
00:29unwinding again. But that's not the only reason that people are starting to take a more bearish
00:33perspective on the dollar from here. It's true that the market is moving now to price in Fed hikes
00:40and the idea that the Fed is going to remove that easing bias quite soon. But it's also true
00:46that the market isn't really seeing the Fed moving until the early next year. And in the meantime,
00:53it's expecting that the ECB, the BOE and other major central banks will be raising interest rates
00:58faster. So that's one reason why people are looking for dollar weakness relative to its major
01:03peers. Of course, over here in Asia, you know, you're already seeing signs of that happening with
01:09more central banks moving quicker. Yeah. Well, Paul, let me ask you about that, because in DM world,
01:15we talk about a 25 basis point rate hike. In EM, it's significantly more. And we've had the likes of
01:21the Sri Lankan central bank raise interest rates by 100 basis points. You've had interest rate raises
01:27come through from Pakistan, from Indonesia as well, to the tune of 50 basis points.
01:32How much is that going to go in terms of stabilizing those currencies and those countries'
01:39currencies, which are coming under selling pressure?
01:43It's a good question, Shimana. And I think in the Asia region, there's two different reasons why
01:47central banks are hiking. One is because they're worried about growth and inflation. And we're seeing
01:54that becoming part of the conversation in the likes of South Korea, maybe Japan as well,
01:59and Australia and New Zealand. But others that are hiking to sort of protect as a defensive move,
02:03because the high price of importing oil is really hurting their economy, as well as driving up
02:08inflation. And I think the South, the likes of Sri Lanka, Indonesia, Pakistan, as you mentioned,
02:14those are the ones that are moving more aggressively to try to protect the currencies. But actually,
02:18because they're in this point of distress, that's not working so well. So most of those currencies
02:22are giving back some of the gains that they've taken recently.
02:26Paul, does the BOJ still hike at its next meeting, given the slightly softer than expected
02:30inflation out of Tokyo?
02:34It seems imperative for the BOJ to get on with things, Tom. You know, it's got runaway inflation
02:41that's really pushing up yields at the back end of the curve. People are starting to question the
02:45credibility of the central bank and its ability to control inflation. And also, the yen is still on the
02:50ropes, right? We'll learn later today exactly how much they spent defending it and trying to prop it
02:55up. But it's already weakened back towards that 160 level. So unless they hike and signal that there's
03:00going to be more heights, you could see the scenario where even in that weaker dollar case that we've
03:05been talking about, the yen still comes under more pressure.
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