Source: MNI – Market News/Bloomberg
- In the context Feb 2025, tariff concerns will be front and center from an investor standpoint. Trump has mentioned the Feb 1 date as a potential launch point for some tariffs against Canada, Mexico and also China. If Feb 1 comes and goes without any tariff action we may see a further relief rally in regional FX, albeit with a less supportive seasonality backdrop.
- This backdrop is in part tied to the tight inverse relationship the Asia dollar index has displayed with the US 10yr real yield, see the second chart below (where the US real 10yr is inverted on the chart). Outside of tariffs (and its impact on US yields), the very elevated US real yield backdrop remains a headwind to Asia FX, with continuing uncertainty around the extent of further Fed easing in 2025.
Fig 2: Asia Dollar Index Versus US Real 10yr Yield (Inverted)
Source: MNI – Market News/Bloomberg
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