Quick Update on Market

Usually, I don’t read into short-term signals, but happening over the last couple of weeks worth a look. Sell down last Friday, triggered by the US Securities Exchange Commission, who sued Goldman Sachs for defrauding investors via a product-related to subprime mortgages, has made markets turned defensive. Pay close attention to equity futures which are already looking for Dow to break below the psychological 11,000 level this week.

If US banks become the dominant theme this week, look for USD and JPY to become safe haven currencies, and stronger profit-taking in emerging Asian currencies and commodities currencies is anticipated. The Asian currencies are vulnerable to risk aversion. Owing the strong appreciation from last week’s surprise ‘twin-tightening’ in its exchange rate policy, the SGD will be most vulnerable for short-covering. Likewise, USD/IDR, which has not been able to break sustainably below 9,000 and is now most vulnerable to upside risks, if the Jakarta Composite Index starts retreating from its all-time high. And in the case of Thailand, the finance ministry and the central bank have warned about more THB weakness as the army and protestors moved closer towards a showdown in Thailand. Under the circumstances, I expect China is likely to get some respite from recent US-led international pressures toi revalue its RMB.