Asia Roundup: Yen strengthens on risk-off sentiment, Fed rate hike speculation limits greenback losses, crude oil declin

12 September 2016, 09:52
Eko Rediantoro

Market Roundup

  • Hillary Clinton diagnosed with pneumonia, rumors swarm – various media.
  • CFTC IMM CTA data – Specs lift USD bets for first time in six weeks, JPY longs down to 54.4k contracts, EUR shorts up to 92.6k, AUD longs off, GBP outlier with shorts off.
  • BoJ to weigh different approach, but markets wonder what next – Nikkei.
  • Japan July core machinery orders +4.9% m/m, +5.2% y/y, -3.5% and +0.3% eyed, second unexpected month of good gains, CabOffice ups assessment of sector.
  • Japan Aug domestic CGPI -0.3% m/m, -3.6% y/y, -0.2% and -3.5% eyed, drop slower on fuel, utilities cited, July -3.9% y/y.
  • Japan Inc on track to float record Y4.5tn in bonds this quarter - Nikkei.
  • PBOC – China should curb money flows into property, state firms – CBN.
  • Dallas Fed Kaplan – Each regional Fed has own views on GDP, unemployment, divergence not that great, 1.75-2% growth driven by consumer spending eyed, structural report-fiscal policy steps needed, need to get used to slower China growth – Reuters.
  • North Korea ready for another nuclear test – Yonhap.
  • OPEC SecGen Barkindo – OPEC not seeking definite price range, but market stability at Algiers meeting – Algeria APS news, Reuters.

Economic Data Ahead

  • (0300 ET/0700 GMT)   Denmark CPI YY
  • (0300 ET/0700 GMT)   Denmark Inflation (HICP) YY

Key Events Ahead

  • Singapore, Indonesia and Malaysia holidays.
  • (0500 ET/0900 GMT) Italy E6.75 bln 12-month BOT auction.
  • (0530 ET/0930 GMT)Germany E2 bln 6-month Bubill auction.
  • N/A   Toronto IEFA Global Forum, various speakers.
  • (0805 ET/1205 GMT) Atlanta Fed Lockhart speaks at Atlanta NABE annual meeting.
  • (0850 ET/1250 GMT) France E3.1-3.5/1.1-1.5/1.0-1.4 bln 3/6/12-month BTF note auctions.
  • (1300 ET/1700 GMT) Minny Fed Kashkari speaks at St. Paul forum.
  • (1315 ET/1715 GMT)Fed Gov Brainard speaks at Chicago Council on Global Affairs event.
  • (1830 ET/2230 GMT) RBA AsstGov Kent speaks at Sydney Bloomberg breakfast event.

FX Beat

DXY: The dollar index, against a basket of currencies trades 0.1 percent lower at 95.26, having touched a high of 95.58 in the previous session.

EUR/USD: The euro edged up, pulling away from a low of 1.1198 touched on Friday amid ongoing speculation that the Federal Reserve might raise interest rates at the upcoming policy meeting. The major weakened in the previous session after Fed Rosengren’s comments that the central bank was avoiding to hike rates might affect a few asset classes negatively boosted the greenback across the broad. The European currency trades 0.1 percent up at 1.1244, attempting to extend gains above the 1.1250 level. With the Eurozone economic calendar absolutely data empty, markets attention will remain on Fed official speeches which could provide further hints on U.S. monetary policy outlook. Immediate resistance is located at 1.1270, break above could take it over 1.1330. On the lower side, support is seen at 1.1200 (10-DMA), break below could drag it near 1.1150.

USD/JPY: The dollar declined after rising above the 103 handle following Fed Rosengren’s comments on Friday. The weakness came in as a bout of risk aversion underpinned the safe-haven yen, however, the losses were capped as the greenback remained supported by renewed talk of a possible Federal Reserve interest rate hike as early as this month. Data released overnight showed Japans machinery orders coming in at an annualized rate of 5.2 percent in July, surpassing consensus of 0.3 percent and previous -0.9 percent, which kept the bid tone around the yen intact. The Japanese yen trades 0.1 percent up at 102.50, having touched a high of 102.29 earlier in the session. Investors now await Fed’s Brainard speech, due later in the day, which might provide clues in favor of the rate hike. Immediate resistance is located at 102.82 (10-DMA), break above targets 103.00. On the downside, support is seen at 101.96 (Previous Session Low), break below could take it near 101.70 (20-DMA)/101.50.

GBP/USD: Sterling steadied after declining to a 1-week low on Friday. The major slumped from a 7-week peak of 1.3445 stuck last week following data showing UK manufacturing posting its biggest fall in a year and after Bank of England Governor Mark Carney kept doors open for further monetary easing, amid revived expectations that U.S. will hike interest rates soon. Sterling trades 0.1 percent up at 1.3272, attempting to regain the 1.3300 handle. Investors will closely watch UKs CB leading economic index and Fed official’s speeches for further cues on the pair. Immediate resistance is located at 1.3320 (5-DMA)), break above could take it near 1.3350. On the downside, support is seen at 1.3199 (20-DMA), break below targets 1.3150. Against the euro, the pound trades 0.1 percent down at 84.71 pence, having touched a 1-week low of 84.95 pence last week.

AUD/USD: The Australian dollar edged down, having touched a 1-week low below the 0.7600 handle. The major shed 1.3 percent on Friday, its biggest 1-day fall in 2-1/2 months and retreated from its 3-week highs, as investors priced in high risk of a near-term interest rate hike by the Federal Reserve. On Friday, Boston Fed President Eric Rosengren stated that low-interest rates were raising the possibilities of an overheated economy and gradual interest rate hikes might be in order with the U.S. economy at full employment. The Aussie trades lower at 0.7533, having touched an early low of 0.7520, its lowest since Sept. 1. The major will be driven by overall market sentiment, ahead of U.S central bank official’s and Reserve Bank of Australia Assistant Governor Chris Kent speeches later in the day. Immediate support is seen at 0.7520, break below could drag it lower 0.7500. On the upside, resistance is located at 0.7579 (10-DMA), break above targets 0.7600.

NZD/USD: The New Zealand dollar steadied, regaining some of the heavy losses amid tumbling global equities and commodities’ prices. The major touched a 16-month high of 0.7485 last week, however, it has declined from there on. The Kiwi trades 0.1 percent up at 0.7325, attempting to sustain gains above the 0.7300 handle. With lack of relevant fundamental triggers today, investors focus shifts towards series of Chinese data due tomorrow and New Zealands second quarter GDP release later in the week for fresh cues on the next direction of the pair. Immediate resistance is located at 0.7350, break above targets 0.7381 (5-DMA). On the downside, support is seen at 0.7298 (20-DMA)), break below could drag it till 0.7268.

Equities Recap

Asian shares tumbled after reports indicated that the Bank of Japan was considering ways to steepen the Japanese yield curve, along with speculation that Federal Reserve might raise U.S. interest rates as early as next week.

MSCIs broadest index of Asia-Pacific shares outside Japan fell 2.2 percent, hovering away from a 13-month peak.

Tokyos Nikkei lost 1.73 pct at 16,672.92 points, Australias S&P/ASX 200 index declined 2.18 pct at 5,222.90 points and South Koreas KOSPI shed 2.0 percent at 1,995.20 points.

Shanghai composite index slumped 2.4 percent at 3,005.30 points, while CSI300 index was trading 0.2 percent down at 3,241.21 points.

Hong Kong’s Hang Seng was trading 2.8 percent lower at 23,428.69 points. Taiwan shares ended 1.2 percent down at 8,947.06 points.

Commodities Recap

Crude oil prices declined over 1 percent, extending previous session losses as a result of rising oil drilling activity in the United States, with speculators reducing positions betting on further price rises. Global benchmark Brent crude oil was trading 1.25 percent lower at $47.25 per barrel at 0357 GMT, with U.S. West Texas Intermediate crude also down by 1.3 percent at $45.10 a barrel.

Gold prices slumped for the fourth straight session after late last weeks hawkish comments from U.S. Federal Reserve officials increased expectations of an interest rate hike as early as September. Spot gold was trading at $1327.89 an ounce by 0401 GMT after hitting an early near 1-week low of $1324.80. U.S. gold futures dropped 0.3 percent to $1,329 an ounce.

Treasuries Recap

The 10-year U.S treasury yield stood at 1.6663 percent lower by 0.005, while 5-year was at 1.12209 percent down by 0.003 bps.

The Australian government bonds plunged as the United States Federal Reserve rate hike speculation gathered steam following hawkish comments from the Fed policymakers. The yield on the benchmark 10-year Treasury note rose to near two-month high by 9-1/2 basis points to 2.116 percent and the yield on short-term 2-year also jumped 4-1/2 basis points to 1.611 percent.

The New Zealand government bonds closed mixed, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. The yield on the benchmark 10-year bond fell 1 basis point to 2.455 percent, the yield on 7-year note ended 1 basis point lower at 2.135 percent and the yield on short-term 2-year note jumped 6 basis points to 1.935 percent.

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