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Focus is currently on Washington where a US government shutdown deadline looms this weekend unless a stopgap funding bill is agreed.

We’ve analysed where the Aussie dollar has spent most of its time since it was floated in 1983 and the results may surprise you.

Two weeks ago, we wrote on the outlook for the AUD from our Head of FX Strategy, Ray Attrill highlighting the expected move of the AUD/USD into the US$0.70-0.75 cent range.

Our 2018 forecasts for Asian currencies reflect the view of reduced impact of Fed’s policy normalisation and more confidence about Asia’s external sector performance and overall growth prospects along a global economic recovery.

While significant progress has been made on liberalising the RMB and opening up the onshore bond and equity markets, there are other structural reforms that need to happen before the floodgates can be thrown open.

North Korea, China’s Communist Party Congress and Singapore’s policy rate decision are on market radar in October, along with Fed’s policy normalisation thereafter.

China is set to increase foreign ownership of Chinese debt. In the near term, we expect Chinese bond market inflows north of US$1 trillion, but in the medium term inflows of more than US$2.5 trillion would not be beyond the pale.

North Korea, China’s Communist Party Congress and Singapore’s policy rate decision are on market radar in October, along with Fed’s policy normalisation thereafter.

There are some signs of hesitation about pushing Asian currencies to significantly stronger levels than currently. While most will still respond to the US-centric factors in the USD price actions, but some domestic concerns could be kicking in.

Most Asian currencies ended the first half of 2017 stronger vs the USD, this strength has led to the unintended consequences of tighter monetary conditions and worsening terms of trade.

Focus is now on whether the interest rate differentials between the US and Asia will start to matter for Asian currencies.

The USD’s softness has “strengthened”, ironic as it sounds. Perhaps it is more apt to say that the USD is increasingly depicting a soft Trump environment.

Our G10 FX Strategists still believe that the dollar can end 2017 higher than it is today, but a resumption of an appreciation trend could well be delayed until H2 2017.

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