'Short Singapore dollar' idea was a winner

Dubai - Southeast Asia's high-beta, politically-toxic, off-balance sheet debt crippled currency is the Malaysian ringgit

My tactical idea to short the Singapore dollar at 1.35 for a 1.40 target is now in the money as Southeast Asia's ex-hard money Swissie, current sad-sack China trade proxy has depreciated to 1.38. This has also vindicated the Bharat Mata (Mother India) carry strategy (long rupee/short Singapore dollar) even though the rupee has sunk to 67.40 as I write. My opinions mean squat when the hoofbeats of the herds are on the move and the herds of Planet Forex scramble to buy King Dollar now that the Federal Reserve has begun to play mind games with the world ahead of its June monetary conclave.
Aunt Janet's Politburo (also known as the FOMC) has begun to huff and puff about a June rate hike, as the April minutes showed. The Fed claims to be "data dependent" but it is really market and chairman ego (at least under Helicopter Ben and humbled Maestro Alan) dependent. There is an open revolt against Dr Yellen's dovishness among the inflation hawks of the FOMC - Dudley, Lacker, Fischer, Williams and Lockhart. The 2.5 per cent rise in wage growth gave the FOMC hawks the intellectual ammunition they needed to sqwak about a June rate hike.
The entirely predictable result? A global scramble to accumulate King Dollar. Hence the logic of my short Sing dollar at 1.35 trade idea. The Buckeroo, after all, is the planet's currency safe haven of the last resort and in times of (geopolitical binary event risk) stress, the financial markets go ballistic and go home to Mommy and global Mommy Central is the United States. Hence the seven-week low in global equities, the rise in the Volatility Index to 17 and the money making macro trades shorting high-beta emerging market currencies, from the Turkish lira and the South African rand to the Russian rouble and Brazilian real.
Southeast Asia's high-beta, politically-toxic, off-balance sheet debt crippled currency is the Malaysian ringgit. After all, 50 per cent of ringgit debt is held by foreigners and $6 billion of Malaysian sovereign wealth fund's assets have ended up acquiring a suntan in the Swiss Alps, even though billions flowed right back in the personal accounts of bumiputra political luminaries. Boys will, of course, be boys in the Third World - when the cookie jar is full of hard currency! The binary macro risk in June are crystal clear. The Brexit vote. The Republican convention circus. Khalid Al Fahih's first Opec meeting as the new Saudi oil minister. A tragic EgyptAir plane crash in the Greek isles.
The irony about the current scramble into embrace King dollar is that April payrolls were soft while global financial conditions had begun to ease with gold at $1,300, Brent at $48, the Uncle Sam 10-year note at 1.70 per cent, credit spreads narrower and the Chinese yuan stable. The market was positioned dangerously short dollars, hence the FOMC chicken hawk inspired squeeze.
Ironically, the dramatic bull markets in the risk assets since mid-February, from oil to Brazil, West Texan high-yield debt to the price of copper and gold, were also triggered by shifts in Fed rhetoric, as Dr Yellen did her best in successive meetings to talk the US dollar down after the Shanghai G20, a de facto Plaza Accord echoed by subsequent ECB and Bank of Japan rate meetings since March. The December FOMC rate hike and FOMC dotplot projections of four 2016 rate hikes triggered a 300-point meltdown in the S&P 500 index and financial carnage in China/emerging markets. So Janet Yellen panicked in February and sang dovish sweet nothings to the bond market. So the euro surged to 1.15, the Japanese yen to 106, money centre bank shares sank and oil was up 72 per cent from its lows. Now the risk rally has unravelled again as the Federal Reserve debates QE exit.
Two dark macro (ichimoku?) clouds scare me. One, both Hillary Clinton and The Donald will ratchet up protectionist rhetoric against China and Japan in the endgame to the US election. This means Taro Aso will be unable to intervene (politics, my dear Watson!) as the yen surges above the BOJ samurai's "line of death" at 105. The prospect of dollar yen at 96 will trigger a global financial crash. Two, the US Treasury yield curve has begun to flatten, exactly as it did in the countdown to the great crash of 2008. The current two/10 Uncle Sam debt yield curve is the flattest since November 2007, the month the stock market peaked and global crisis began. Cicero said that not to know history was to forever remain a child. Only a fool bets against history and I hope I am no fool.