Nomura: Tech stock pressure weighs on the dollar as Nomura raises its short USD/CNH position to maximum

Why has Nomura turned bearish on the dollar?

Nomura has gradually moved away from its previous bullish dollar view since 16 October, mainly because of weakness in US technology stocks and slower inflows into US securities markets. The bank believes further declines in technology stocks could further depress foreign inflows and the dollar.
The pressure comes from two directions: credit risks at small, highly leveraged technology companies, and whether large technology companies can generate sufficient revenue after expanding capital expenditure. As of 29 October, 14.7% of loans to US technology companies were at distressed levels, near their high for the year; Nomura also noted disappointing recent results from Alphabet and Amazon.
Nomura expects the dollar index to fall from 101.70 on 30 October to 96.90 at the end of 2026. The dollar could also strengthen again if US technology stocks stabilize and energy prices remain high or continue to rise.

Nomura raised its conviction in short USD/CNH from 4/5 to 5/5, targeting an exchange rate of 6.50 by the end of December 2026; 5/5 corresponds to 100% of its planned position. The bank estimates the trade's total return at approximately 3%.
Factors supporting the view include continued foreign currency conversion by Chinese companies, an undervalued renminbi, and political factors in China and abroad that favor renminbi appreciation. Nomura also observed that, although clients are generally bullish on the offshore renminbi, their positions are limited, leaving room to add exposure.
Seasonality is another basis: in the decade through 2025, spot USD/CNH fell by an average of 67 and 63 basis points in November and December, respectively, declining in 80% of years in each month. However, renminbi exchange rate management remains a significant risk to the trade.

Nomura maintains its short USD/JPY position, targeting 152.50 by the end of December 2026, with conviction of 3/5. The bank believes fragile risk sentiment could support the yen, while the Bank of Japan's assessment of progress toward its 2% inflation target helps sustain market expectations of further rate hikes. The trade would face pressure if US rate expectations rose again and pushed up the dollar, or if the Bank of Japan were more dovish than expected.
For Hong Kong rates, Nomura maintains 5/5 conviction in receiving a one-year interest rate swap starting in March 2027, and has lowered its target rate from 3.80% to 3.60%. The trade benefits from a decline in the relevant swap rate; the bank believes US short-term rates still have room to fall and Hong Kong interbank liquidity is ample.
But Hong Kong short-term rates do not move only downward: over the past decade, the 3-month Hong Kong interbank offered rate rose by an average of 11 basis points in November. Nomura believes this seasonal factor is reflected in prices to some extent.

Nomura expects that if Democrats gain control of both houses of Congress, tighter data center regulation, less large-scale fiscal stimulus and political wrangling could initially weigh on US equities and the dollar. If Democrats win only the House and Republicans retain the Senate, US equities and the dollar could receive a temporary boost.
US nonfarm payrolls data for October are scheduled for release on 6 November. The Bloomberg market consensus is for an increase of 55 thousand jobs, following an increase of 29 thousand previously. Nomura believes that, amid concerns about US equities, the negative impact on the dollar of a reading 100 thousand jobs below consensus could be greater than the positive impact of a reading 100 thousand above consensus; a deviation within 50 thousand jobs is unlikely to materially change the bank's view.