Why is China reducing US Treasury exposure now when US-China relations are stable?
Yvonne
Eugenia Victorino
This is nothing new; China's share of foreign-owned US Treasuries is only 2%. The market reaction is due to lack of new dollar drivers.
Could this lead to more volatility in dollar assets?
Yvonne
Eugenia Victorino
Volatility more likely from other investors (hedge funds, mutual funds) who own ~25% and trade actively, not from China's gradual reduction.
What about Japanese repatriation risks for Treasuries?
Yvonne
Eugenia Victorino
Japanese institutional investors unlikely to take big risk before fiscal year-end in March, but may return in April as JGB yields become attractive and BOJ slows QT.
How long will dollar-yen weakness last?
Yvonne
Eugenia Victorino
As long as details on consumption tax cuts and funding are lacking, market will be wary despite government assurances.
What's your dollar view given Fed pricing and Kevin Warsh?
Yvonne
Eugenia Victorino
Weak dollar story is on its last legs. Market has priced >2 cuts, we see 3 cuts, but dollar should start rising in H2 as market anticipates end of cutting cycle.
Will Kevin Warsh's hawkishness change the Fed path?
Yvonne
Eugenia Victorino
Room for three more cuts; market is complacent about cuts continuing. No inflation signal suggests he should turn hawkish imminently.
Your non-consensus call for dollar-yuan above 7?
Yvonne
Eugenia Victorino
Dollar can't continue down without fresh catalyst; market would need to price 4th or 5th cut, which data don't support.