Currency View September 2011

CURRENCY MACRO
Problems in the Euro & CHF has seen USD rise to highest level since Feb, but USD fundamentals are poor & further action by Fed will reverse current strength AUD is one of the key global risk barometers so no surprise its under pressure given Euro & US problems, unless China falls over a major rout is unlikely as interest rates remain supportive Euro debt problems are dominating sentiment, even if these are resolved in the short term the longer term problems remain, Euro fundamentals are in reverse as a result Euro problems have spilled over to GBP, UK fundamentals will probably not be as bad as Euro but still not good Asian currencies have been hit hard after previously holding ground, reports suggest big sell off in global holdings of Asian bonds but ultimately the fundamentals support stronger Asian currencies JPY still strong & given CHF moves it is viewed as the safe haven left, we do not share that view but while USD & Euro are basket cases JPY strength may persist Similar to SGD & IDR sharp fall due to global sell off but fundamentals still solid so trend will resume IDR has been the favourite for global investors so has been hard hit on liquidations during the latest Euro crisis, CBI seems happy to see a reversal some recent strength, fundamentals still positive Central Bank surprised with another 25bp i/r rise in response to run away inflation, investors dumping INR & stocks as a result

INTEREST RATES

TECHNICALS
Bearish/Neutral: Price > moving average for the 1st time in 12 months but moving average still trending down

VIEW

USD Index

Current = 0, Fed on hold but more action likely

Bearish/Neutral: Short term lift in USD, based on Euro problems is unlikely to last long

AUD

Current = 4.75, rates on hold but market factoring in cuts

Bullish: Price < moving average but moving average still trending up

Neutral: AUD has peaked for now & ranging between 1.00 - 1.10 is likely, a break of parity would signal that global problems are escalating

EUR

Current = 1.50, ECB looks likely to have to reverse direction & cut rates

Neutral : Price < moving average but moving average still trending up

Neutral/Bearish: Sharp fall in Euro & break of 1.40 is significant, problems look large so further falls are possible towards 1.30

GBP

Current = 0.50, still on hold but further QE possible

Neutral : Below 200 day moving average & average rolling over

Neutral/Bearish: Broken below 1.60 driven by short term USD, will come under pressure if Euro continues down

SGD

Current = 0.55, MAS tightening bias on hold due to uncertain global situation

Bullish: Below 200 day moving average but moving average trending up

Bullish: Short term correction based on Asian market redemptions but trend is still down - remains key buy

JPY

Current = 0.00 - 0.5, BOJ will print more JPY

Bullish: above 200 day moving average

Neutral : Trend still up but very damaging to Japan, given CHF moves some action likely to reverse strength

MYR

Current = 3.00, on hold for now

Bullish: Below 200 day moving average but moving average trending up

Bullish: Long term trend is still up but sharp reversal in the short term - key buy

IDR

Current = 6.75, rates may be hold given global uncertainty

Bullish/Neutral: above 200 day moving average but average still trending down

Bullish/ Neutral: Sharp sell off is a proxy easing of monetary policy for CBI, fundamentals still solid but reversal suggests upside limited for now

INR

Current = 8.25, RBI increase rates again

Bullish: Above 200 day moving average & average turning upwards

Neutral: Sharp fall kills off 2 1/2 yr uptrend in INR, ultimately it will rise against USD but not for now

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Currency View September 2011

CURRENCY MACRO
China seems to be one hope for the global economy, growth looks ok but inflation still not easing yet, fundamentaks needs to be watched Strength in BRL has been a problem but CB surprised by cutting rates in a clear change of policy from reducing inflation to weakening the currency

INTEREST RATES

TECHNICALS

VIEW

CNY

Current = 3.25 tightening bias near an end

Bullish: above 200 day moving average

Bullish: Pause in upward trend under way but gradual appreciation to continue

BRL

Current = 12.0, surprise cut in i/r

Neutral/Bullish: Above 200 day moving average & average turning upwards

Bullish: Big up trend in BRL is over for now based on current support for USD & action by CB

BASE CURRENCY

AUD

GBP

EUR

JPY

SGD

CHF

AUD

Neutral: AUD has recovered from sharp fall but upside in AUD is now

Neutral: AUD has recovered on Euro weakness but upside in AUD limited

Bearish: JPY still strong during crisis & short term trend is down but unlikely to last

Neutral: AUD has peaked but likely to range around current levels

Neutral : SNB peg CHF to Euro kills off big downtrend against CHF

GBP

Neutral: GBP bottomed for now after a big downtrend

Neutral: Both weak against the USD, Euro may weaken more but no trend yet

Bearish: GBP has fallen to near recent lows @ 120, trend is down but major downside unlikely

Bearish: Small correction but trend is still down & fundamentals for Asia vastly superior

Neutral: SNB peg CHF to Euro kills off big downtrend against CHF

EUR

Neutral: Big downtrend looks to be over for now so ranging against AUD likely

Neutral: Both weak against USD, still in range for medium term despite Euro problems

Bearish: Euro fallen to new lows but JPY strength looks unsustainable

Neutral: Eur tested long term lows but reversed quickly as Asian ccy are sold off

Neutral: SNB peg CHF to Euro kills off big downtrend against CHF

SGD

Neutral: SGD has eased against AUD but has bottomed longer term

Bullish: Sell off in SGD but trend still up supported by the fundamentals

Neutral: SGD hit new highs but quickly reversed suggesting upside limited

Bearish: JPY remains strong but eventually we expect the SGD to be much stronger

Neutral: SNB peg CHF to Euro kills off big downtrend against CHF

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Currency View September 2011

Disclaimer: The price of shares and the income from them can go down as well as up as a result of changes in the value of underlying securities and currency movements. An investor may not get back the amount originally invested. Past performance is not necessarily a guide to future returns. This document and the funds to which it refers is for the use of professional investors and financial intermediaries only. No reliance must be placed on this information by any other persons. This letter and its attachments is neither an offer to sell nor a solicitation of any offer to buy shares in the funds to which it refers. Any offering is made only pursuant to the relevant information memorandum, together with the current financial statements of the relevant fund, if any and the relevant subscription application, all of which must be read in its entirety. No offer to purchase shares will be made or accepted prior to receipt by the offered of these documents and the completion of all the approved documentation.

Source:

- September 2011

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