Philippines, Malaysia, Indonesia, breaking news! Pakistan, latest statement!

The Forex Market Faces Major Uncertainty!

Today (April 2), Iran’s Supreme Leader’s adviser on foreign affairs and former foreign minister, Hossein Amir-Abdollahian, said on his personal social media account that the Strait of Hormuz is open to the world, but will forever remain closed to the enemies of the Iranian people and their strongholds in the region. Meanwhile, Pakistan’s Ministry of Foreign Affairs said it has not yet confirmed any U.S. delegation visit for discussions.

Against this backdrop, the stock, bond, and forex markets all saw a moment of jitters. Citing a Reuters survey, data provider Jintong Data said that short positions in the Philippine peso have been placed at the highest level since October 2022. Analysts trimmed their bullish positions on the Malaysian ringgit. Short positions in the Indonesian rupiah rose to the highest level since November 2022. And the stock market plunged across the board.

Major Uncertainty in the Forex Market

Possibly influenced by the situation in Iran, today’s news says that short positions in the Philippine peso have been placed at the highest level since October 2022. Analysts trimmed their bullish positions on the Malaysian ringgit. Short positions in the Indonesian rupiah rose to the highest level since November 2022.

The yen was sharply sold off, and the USD/JPY exchange rate once again moved close to the 160 mark. UBS Group strategists pointed out that although Japanese officials are increasing their verbal warnings about intervening in the FX market, the yen will continue to weaken, and in an “extreme scenario of long-term turbulence,” the USD/JPY exchange rate could reach 175 by year-end.

Bearish pressure on the pound is also starting to show. In a report, Deutsche Bank analyst Michael Pfister said that after the Bank of England governor Bailey “dampened” the market’s rate-hike expectations, the pound faces further downside risk. Meanwhile, the U.S. Dollar Index surged aggressively in today’s Asia-Pacific session.

According to China Central Television (CCTV) News, on April 2 local time, Iran’s Supreme Leader’s adviser on foreign affairs and former foreign minister, Hossein Amir-Abdollahian, said on his personal social media account that the Strait of Hormuz is open to the world, but will forever remain closed to the enemies of the Iranian people and their strongholds in the region. Amir-Abdollahian said that ending the conflict depends on Iran’s decisions and strength, not on the delusions and arrogance of the aggressors.

Also, Reuters reported that Pakistan’s Ministry of Foreign Affairs is mediating between the United States and Iran in an effort to end the war. The ministry announced that, as of now, “a U.S. delegation coming for talks has not been confirmed.” Separately, it was reported that Islamabad “will continue to work with the U.S. leadership to seek a way to end the war.” As for the claim that Pakistan, Turkey, Saudi Arabia, and Egypt will develop into a defense alliance, “it is too early.”

Global Stocks and Bonds Under Pressure

In addition to energy and the U.S. Dollar Index, most of today’s global assets are under pressure.

In its Q2 market report, Dah Sing Bank said that the U.S.-Iran conflict has led to uncertainty about the outlook. Energy and transportation prices in various places have contributed to global stagflation. With the outlook for the conflict in the Middle East remaining highly unclear, purchasing managers’ indexes for economic activity in March across multiple countries also showed a noticeable increase. The bank believes that the degree of the conflict’s impact on the economy depends on how long the fighting between the two sides continues.

The report argues that crude oil transport through the Strait of Hormuz has continued to face disruption, and that some energy facilities were hit during the war. Even if the United States unilaterally halts hostilities, crude oil supply may not recover immediately, and it believes short-term incremental risk is rising. The economy in the Middle East region is expected to be severely impacted by the war, and Japan, which is highly dependent on imported energy and raw materials, may also be hit more significantly. Asian stock markets (excluding China’s) may continue to be clearly affected by developments on the battlefield.

The U.S. Dollar Index may also keep moving higher. Geopolitical risks may from time to time boost risk-aversion sentiment. Combined with the stability of the Federal Reserve’s expectations for the inflation outlook, and the fact that the U.S. economy is likely to be less affected by energy price shocks than in the past, the medium term may continue to support the dollar’s performance.

What is worth noting is that just as global markets are widely betting that the Federal Reserve is about to begin a rate-cut cycle, Gombak Capital founder Gornak, hailed as the “new bond king,” has issued a radically opposite warning signal. In an interview, this Wall Street legend, who accurately predicted both the 2007 subprime crisis and the 2022 peak in U.S. stocks, pointed out that expectations of rate cuts are the “biggest illusion.” The Federal Reserve could even be forced to raise rates next, and the global financial system is facing severe challenges.

Layout: Wang Yunpeng

Proofreading: Pan Da