Dollar Seems Sturdy Versus Asian Baskets

We’ve already flagged the fall through export sector and how this will bolster efforts by Asian policymakers to encourage currency weakness through various channels including direct intervention, rate cuts, or more direct regulatory measures.Currency Derivatives Roundups:We shift EM Asia FX trades to neutral approach and add to slightly long USD/Asia baskets in our leveraged portfolio through SGD (outright), THB (3m forward), and TWD (USD call spreads).Option Strategy:Considering fundamental developments, we recommend buy a 5-month USD/TWD 30.8-31.4 call spread.Long At-The-Money Call (strike at 31.14) and Short Out-Of-The-Money Call (with higher Strike at 31.20) with the same expiration date for a net premium payable.This is worth using over a long call as the costs of the long ATM calls are too expensive and the USD is projected to move somewhat higher.Credit from short call OTM call reduces the cost of long call.

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