Daniel Hui - the Asian take on Euro-Dollar

18 Nov 2011 CNBC

(Presenter)

We do see the Euro picking up a bit more steam towards 1.35....Daniel, so the Euro-Dollar cross, the bond auction didn't go too well, people are talking about a circuit-breaker? Where do we go from here? The next resistance level is 1.31? What's your call?


(Daniel Hui, Senior FX Strategist, HSBC)

I think clearly what you're seeing in European sovereign bond markets is that the market is really pushing the European policymakers to really come up with a lasting solution, probably involving the ECB acting as lender of last resort, expanding its balance sheet. Obviously the ECB not prepared to go this way




{How many times can we keep going round in circles}




(Daniel Hui, Senior FX Strategist, HSBC)

But when it comes to currencies however...you can argue quite convincingly that being short the Euro hasn't been the right way to play the European sovereign debt crisis. You say we're at a 5-week low, we're really not at a year's low, we entered this year around these levels. So Euro-dollar rate is not reflecting the state of conditions in the Eurozone [Amazing]


(Presenter)

If we don't get the big bazooka, the details, Merkel says we are entering a new confidence crisis....does this mean it is just a matter of time?


(Daniel Hui, Senior FX Strategist, HSBC)

I would caution drawing conclusions. As a currency area, the Eurozone looks actually healthy, there is a relative current account surplus. If you take out the speculative currency shorts [!] there have been capital inflows. If you go through the scenario of Greece leaving the Eurozone you could argue that the remaining Eurozone area would be stronger not weaker [oh my god]. We think there are fundamental reasons for this.


(Presenter)

So forget about shorting the euro!


[On the US dollar]

We think it's a story that hasn't been highlighted enough.

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