Market Overview - Global market trading atmosphere is cautious due to escalating tensions in the Middle East and uncertainty surrounding the Federal Reserve's monetary policy decisions [1] - Investors are adopting a wait-and-see approach towards stock and currency markets [1] Currency Performance - The US dollar index has seen a weekly decline of -1.14% [3] - The GBP/USD pair performed the worst in the week with a decline of -0.79%, despite the GBP reaching a high of around 1.35, supported by weak dollar performance and rising UK inflation [3] - The EUR/USD pair also experienced a notable weekly decline of -0.37%, with the euro remaining in a medium-term upward trend [3] Economic Indicators - US retail sales data has shown weakness, leading to close monitoring of the Federal Reserve's "dot plot" for clues on potential interest rate cuts [1] - In the Eurozone, May inflation data showed a year-on-year increase of 1.9%, aligning with market expectations, while core inflation rose by 2.4% [6] - Japan's overall inflation rate has risen to 3.6%, significantly above the Bank of Japan's target of 2% [8] Central Bank Policies - The Federal Reserve is expected to maintain current interest rates but will update economic and interest rate forecasts [1] - The Bank of England is anticipated to keep rates unchanged, despite high core inflation levels [3] - The Bank of Japan has decided to maintain current rates, reflecting a cautious monetary policy stance amid external uncertainties [7]

Group 1 - The demand for USD put options is strong amid a weakening dollar, with prices for these options exceeding those for call options, particularly in the euro to USD risk reversal options, where the premium for USD puts reached a five-year high in May [1] - Two main factors supporting the dollar are the extreme divergence between the dollar and interest rates, and geopolitical tensions leading to rising oil prices, which may favor the dollar due to liquidity advantages [1] - The Swiss franc has seen the largest fluctuations against the dollar across all time frames, particularly a -1.12% change over one week, while the dollar index has remained relatively stable [2] Group 2 - The GBP/USD exchange rate rose from 1.3525 to 1.3598, reaching a high since June 5, driven by USD selling pressure, despite previous declines due to weak UK GDP data [5] - Analysts expect the UK economy to contract more than anticipated in Q2, with a 0.3% contraction in April, leading to increased expectations for interest rate cuts later this year [5] - The Japanese yen's appeal as a safe-haven currency has been bolstered by the Japanese government's cautious stance on trade negotiations with the US, with expectations that the Bank of Japan will maintain its current interest rate policy [6] Group 3 - The euro to USD exchange rate surpassed 1.1600, reaching a three-year high, with the options market prepared for this rise through risk reversal options and direct purchases of euro call options [7] - The European Central Bank's interest rates are expected to remain unchanged in the foreseeable future, although there may be policy adjustments in upcoming meetings [8]

Core Viewpoint - The recent fluctuations in the US dollar index are primarily driven by the reassessment of US fiscal and credit risks, following Moody's downgrade of the US sovereign rating and the anticipated increase in federal debt due to large-scale tax cuts and expansionary fiscal policies [1] Group 1: US Economic Indicators - The 30-year US Treasury yield has surpassed 5.1% due to rising fiscal risks [1] - In April, the foreign exchange settlement deficit slightly widened, with increased corporate foreign exchange transactions indicating heightened trading activity [1] - The US PMI preliminary reading for May exceeded expectations, although Moody's downgrade has weakened confidence in the dollar [1] Group 2: China Economic Indicators - China's cross-border capital inflow remains strong, with a stable goods trade surplus [1] - The People's Bank of China has lowered the Loan Prime Rate (LPR) [1] - The volume of foreign capital in Chinese bond custody has rebounded, indicating improved foreign investment sentiment [1] Group 3: European Economic Indicators - The Eurozone's harmonized CPI for April was reported at 2.2% year-on-year and 0.6% month-on-month [1] - The preliminary composite PMI for May was recorded at 49.5, with the services PMI at 48.9, indicating a contraction in the services sector [1] - The European Commission has revised down its growth forecasts for the next two years [1] Group 4: Japanese Economic Indicators - Japan's manufacturing sector remains in contraction, with the May PMI data showing a slight recovery but still below the neutral line [1] - The services and composite PMIs in Japan have declined [1] - Japan's April exports grew by 2% year-on-year, while the CPI for April was reported at 3.6% year-on-year [1] Group 5: Currency Outlook - The US dollar is expected to maintain a weak position in the short term, with potential short-selling opportunities following a period of range-bound trading [1] - The Japanese yen shows short-term momentum [1] - The decline in US credit is unexpectedly strengthening the euro, with attention on the progress of US-EU tariff negotiations [1]

Group 1 - The article discusses the recent appreciation of Asian currencies, particularly the Japanese yen, Chinese yuan, and New Taiwan dollar, amid a currency war initiated by the U.S. [1][5] - The U.S. Treasury Secretary, who has a history of currency speculation, is seen as a key player in this currency conflict, having previously targeted the British pound and Japanese yen [5][9] - The offshore yuan appreciated significantly, rising over 900 points in two days, while the New Taiwan dollar saw an unprecedented increase of over 9% [5][15] Group 2 - The article contrasts the strategies of hedge funds, which aim to devalue currencies for profit, with national strategies that typically seek to maintain or devalue their own currencies to support export-driven economies [6][7] - For export-oriented economies like Taiwan, a weaker currency is beneficial as it increases the profitability of exports, while a strong currency can harm competitiveness [8][14] - The article highlights the risks faced by Taiwanese financial institutions due to their heavy reliance on U.S. dollar assets and the lack of hedging against currency fluctuations, leading to significant losses amid the recent appreciation of the New Taiwan dollar [17][19] Group 3 - The Hong Kong dollar's situation is unique, as it is pegged to the U.S. dollar, and the recent appreciation has led to concerns about maintaining this peg [20][21] - The Hong Kong Monetary Authority has intervened by selling over 100 billion Hong Kong dollars to stabilize the currency, resulting in increased U.S. dollar reserves [21][22] - The article warns of potential asset bubbles in Hong Kong due to the influx of capital, which could pose risks if the market experiences a sudden withdrawal of funds [23] Group 4 - The Chinese yuan's stability is emphasized, with the article noting that it has only appreciated by less than 2% despite a 9% depreciation of the U.S. dollar since January [23][24] - Regulatory interventions are expected if the yuan's exchange rate fluctuates significantly, with historical patterns indicating intervention at certain thresholds [25][26] - The article concludes that while a stronger yuan could attract capital inflows, it is also a bargaining chip for the U.S. in trade negotiations, suggesting that the yuan's appreciation is not straightforward [27][28]

Group 1 - Asian currencies experienced significant appreciation, negatively impacting exporters and putting pressure on stock markets, prompting central banks to intervene [1][3] - The New Taiwan Dollar saw its largest increase since 1988, leading to the biggest drop in Taiwan's benchmark stock index in nearly a month [1][3] - The offshore Renminbi reached its highest level in nearly six months as exporters repatriated dollar earnings [1][3] Group 2 - The Bloomberg index measuring Asian currencies recorded its largest increase since 2022, while an index for emerging market currency returns hit an all-time high [3] - The New Taiwan Dollar surged approximately 5%, driven by speculation that exporters and retailers were selling dollars amid expectations of further dollar depreciation [3] - Taiwan's monetary authorities intervened in the market, urging foreign investors and large exporters to delay dollar sales [3][4] Group 3 - Traders are closely monitoring potential further currency interventions, especially after the Hong Kong dollar tested the strong end of its trading range against the US dollar [4] - The appreciation of Asian currencies is also driven by investors withdrawing funds from the US dollar, amid concerns over Trump's tariffs potentially raising inflation and harming the economy [4] - Analysts suggest that due to the pressure on the US dollar and rising recession risks, the risk-reward profile for maintaining dollar deposits appears unfavorable for Asian exporters [4]