Research Team at Deutsche Bank, suggests that whether by explicit design or (more likely) implicit coordination, central bank action over the past few weeks has managed to kill currency vol, at least before the Fed speak this week which seemed (rather strangely) insistent on painting April FOMC as ‘live’. Key Quotes “With risk on the front foot, correlations have gone north. We don’t know how long this truce would last. But while it does, and given the adjustment to valuations we have already seen, we suspect two dynamics will be important to drive the Asia macro trade. One, a very distinct trend of seasonality in performance of currency and duration markets in the region in Q2, with a hugely positive bias to returns in April, but also a significant shift in fortunes for most of rest of the quarter. Part of the story at least is the strong seasonality in portfolio inflows into the region, with both debt and equity flows from offshore typically recording their strongest (post GFC) prints in the month of April. Two, local market specifics which will likely to come into focus again to allow for greater differentiation between markets. Outside of data, and global policy events of relevance to Asia (G20 on the sidelines of the IMF spring meeting in April, and then G7 in May), we suspect local stories will get more airtime. Seasonality, in particular in Korea, is also the subject of our FX Strategy section, which looks at the trend in dividend payments in the market, and contrasts that with the trend in basic balances overall. The recovery in market sentiment should be seen in the context of very little improvement in real economies. We also reiterate our wariness at chasing Korean long end yields at these levels, given in particular the spread between US and Korea.” For more information, read our latest forex news.