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EM Asian currencies likely to advance amid global reflation policies, recent progress in US-China trade talks: Scotiabank

The EM Asian currencies are expected to advance amid global reflation policies and recent progress in US-China trade talks, according to the latest research report from Scotiabank.

The European Central Bank (ECB) expects its benchmark interest rates to "remain at their present levels at least through the end of 2019," with the details on TLTRO3 to be communicated at one of the forthcoming policy meetings.

The TLTRO3 will help expand the central bank’s balance sheet once again, according to the report. ECB President Mario Draghi warned at the press conference after the bank’s policy meeting that "the risks surrounding the euro area growth outlook remain tilted to the downside," pledging to "adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards the Governing Council’s inflation aim in a sustained manner."

In addition, the Fed has released the minutes of the March 19-20 FOMC meeting, showing policymakers don’t perceive any need to cut their benchmark rate if there isn’t a broader deterioration in the economy.

The minutes also said that the unusually low level of term premiums in longer-term interest rates made historical relationships a less reliable basis for assessing the implications of the recent behaviour of the yield curve, while noting an inverted yield curve could portend economic weakness.

"In our view, the Fed will stay accommodative at least until the end of September in order to avert a yield curve inversion that could dent US market sentiment and spark a selloff in US stock markets. We reckon it is largely due to lower risk-free interest rates and risk premium rather than bright growth outlook that US stocks have been rallying and are approaching previous highs," Scotiabank further commented.

Meanwhile, US Treasury Secretary Steven Mnuchin said on CNBC Wednesday that the US and China have agreed on an enforcement mechanism for the potential trade deal. He added the two sides have made much progress on currency matters and completed the currency part of the trade deal.

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