China stocks down 8% at the time of writing, yen and CHF mysteriously bid. Looks like a (mini) bout of risk aversion is upon us. Macro Man is likely to be busy today with meetings, so he wanted to get in a quickie this morning.
At this point he is uncertain of the extent of the risk aversion event, only that large (negative) moves in uber-speculative assets are generally consistent with broad trimming of risk. That these moves are occuring in spite of the recent Treasury rally is particularly interesting; perhaps fears are mounting of a growth scare as the subprime mess hits the front page of main street, rather than just the Wall Street, journals?
Regardless, some further hedging/trimming would appear appropriate.
He therefore sells 15 million NZD/CHF at 0.8683 (0.86815 to 02 March) and buys $10 million USD/ZAR at 7.1220 (7.1229 to 02 March.)
Hopefully, more to come later.
At this point he is uncertain of the extent of the risk aversion event, only that large (negative) moves in uber-speculative assets are generally consistent with broad trimming of risk. That these moves are occuring in spite of the recent Treasury rally is particularly interesting; perhaps fears are mounting of a growth scare as the subprime mess hits the front page of main street, rather than just the Wall Street, journals?
Regardless, some further hedging/trimming would appear appropriate.
He therefore sells 15 million NZD/CHF at 0.8683 (0.86815 to 02 March) and buys $10 million USD/ZAR at 7.1220 (7.1229 to 02 March.)
Hopefully, more to come later.
3 comments
Click here for commentsHow 'bout that Yen/$, huh?
ReplyI'm not sure this is risk aversion of itself. The USD is getting pummeled across my screen just now, and viz ES. I think someone decided durable goods, consumer confidence and/or (my big bet) existing home sales will be fugly. This is a US story to me. In the end that's a risk-aversion play as well, but still.
Funny how my high-2s Q4 GDP call now looks to be overoptimistic after initially appearing a huge undershoot. H2 is a ways off yet.
I think what you find in these circumstances is that what starts out as an isolated US event swiftly impacts the ROW.
ReplyThe fact that USD/TRY, USD/ZAR, and even non carry junk like EUR/CZK are all up on the day is suggestive of a degree of risk aversion. Certainly there appears to be a fair amount of 'wtf?!?!' going on in the street.
As often is the case, we don't actually disagree much, if at all. I posted that right before bed, and I am no longer sure it makes sense. While market action could fit both with a risk-aversion move or with the US putting the "landing" into "soft landing", the moves in carry to suggest more your scenario a) than c) from the next post.
Reply