US$ rally continues

Asian currencies continue to sell off vs the $ on the heels of the news yesterday that South Korea said they will look into hot money inflows stemming from the $ carry trade and the Bank of Indonesia said they are looking into the foreign buying of bills. This follows the news a few weeks ago that Taiwan was limiting foreign deposit holdings and Brazil was taxing foreign inflow transactions. As I mentioned yesterday, we may have reached a short term pain threshold in terms of $ weakness and foreign countries are fighting back as they certainly won’t wait for the Fed to act. The $ is also at a 2 1/2 week high vs the euro helped out by political infighting in the Ukraine that is holding up the 4th tranche of an IMF loan. Comments from PBOChina Gov gave no indication that they plan to alter the band of their peg to the US$ anytime soon. With 6 wks left in the yr and investors holding their nose, $ action alone will exaggerate equity moves.

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