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Market Talk – April 16, 2018

by Martin Armstrong
Armstrong Economics

The main talking point in Asian trade today was the Hong Kong Dollar seeing another test of its upper band (7.85). The currency has been pegged between 7.75 and 7.85 since 1983 and has remained within that range since 1985. Today was the fifth time in three trading days that the HKMA (Hong Kong Monetary Authority) has had to step in to support the currency at 7.85. One of the reasons for the test is the recent divergence in interest rates and in economies. The HKMA has stated they are prepared to step in again but as history tells us – they will eventually be forced to step away. Both the Shanghai and Hang Seng indices lost around 1.5% today, which is probably the result of people taking risk off the table as capital flow starts to increase and also weighed by recent trade numbers. However, not worth worry too much over the Trade numbers once you see the uptick in Treasury purchases! Interesting that the Nikkei, ASX and SENSEX all performed as their respective currencies lost ground, probably see much more of this in the weeks ahead.

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