Forex Comment Apr 29

Alphabet revenue lifts all boats, dollar fades 

Tech-heavy Asian bourses follow suit after US giant’s results, but Fed still occupying investors’ minds

by Uwe Parpart
Alphabet (GOOG) revenue lifts all boats, dollar fades 

(ATF) Alphabet, the parent of Google, beat Wall Street's first-quarter revenue estimates and the company's stock rose 7% in US after-hour trading, "significant slowdown" guidance for second quarter earnings notwithstanding. This lifted tech-heavy Asian markets and US futures and may have been just what global equities needed to continue the past several trading days' rally.

The US dollar, as is customary when key equities jump, lost ground; but Asian currency trading across the board was very cautious ahead of the US Fed meeting results later Wednesday. At 6pm HK time, the DXY stood at 99.7040, down a mere 0.16% from the Asian open.

The Chinese currency, in line with the mostly steady greenback, moved very little throughout the trading day. The People’s Bank of China (PBoC) set parity at 7.0704 Wednesday morning, near-identical to Tuesday. At 6pm HK time, CNY traded at 7.0751.

What might make the yuan move out of the very narrow trading range with the USD since mid-April? There can be no question that the central bank is paying the closest of attention to the deflationary PPI number (-1.5% in March). An April move to -2.5% year-on-tear, as widely expected, will put upward pressure on the yuan. Only further significant easing will keep CNY above the 7.0 mark.

This is the more important as the Federal Open Market Committee statement later today is expected to stress continued "all it takes" efforts to push the economy onto a recovery path. We may even see an indication of Fed yield-curve targeting going forward, taking another leaf out of the BOJ's easing book.