The Asian dollar index has found some...>

DOLLAR-ASIA: The Asian dollar index has found some support at its 200DMA after

falling almost 3% over the past six weeks. The combination of lower US rate

expectations and the pullback in oil prices has helped stabilise the ADXY. 

- Key to determining the direction of the index over the coming days and weeks

will be interest rate differentials between the US and China, with the yuan

representing 42% of the index. 

- 1-year government bond yields have risen in China over recent trading and

fallen in the US, with the spread widening to 98bps in China's favour from as

low as 65bps on May 10. The widening has likely helped the yuan stabilise

following recent losses. 

- Oil price movements will also play a role, with any further pullback acting as

a benefit to the terms of trade in energy-importing countries such as China,

Korea, India, Singapore, Taiwan, and Thailand.