FOREX: Asia FX Wrap - The USD Challenging Leveraged Shorts Into Corp Month-End

The NZD/USD had a range of 0.5843 - 0.5864 in the Asia-Pac session, going into the London open trading around 0.5845, -0.30%. US equities once again found buyers on the dip and the USD traded a little soft overnight. The NZD traded heavy all through Asia as the USD found a bid tone this morning. We are approaching the corporate month-end so there could be some demand for USD today or tomorrow. US Futures have traded slightly higher this morning, E-minis +0.10%, NQU5 +0.12%.

• Bloomberg - “RBNZ increased its foreign currency intervention capacity to NZ$26.3b at the end of July, according to data released by the central bank on its website. The capacity - foreign currency assets that are readily liquefiable less foreign currency liabilities that fall due in the next 12 months - rose from NZ$25.6b in June”
• “The strengthening yuan is opening the door for more upside for regional peers, particularly those most sensitive to the Chinese currency’s moves such as the Aussie and kiwi dollar, Korean won and Singapore dollar.” - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data:  0.6200(NZD355m). Upcoming Close Strikes : none - BBG
• CFTC Data of last week shows Asset Managers slightly reduced their new short position in the NZD -3198(Last -3679), the Leveraged community also reduced their own shorts slightly -4004(Last -4190).
• AUD/NZD range for the session has been 1.1079 - 1.1109, currently trading 1.1095. The dovish RBNZ has seen the Cross surge higher breaking back above 1.100 convincingly. This move should now continue to see dips supported as it looks to build momentum to push higher.

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The Asia-Pac USD/JPY range has been 147.30-147.95, Asia is currently trading around 147.90, +0.35%. The demand  towards 146.00 has been pretty solid all of July and August, keeping us for the most part in a 146.00-149.00 range. CFTC data for last week shows leveraged accounts again added to JPY shorts so the initial reaction to Powell would have been unwelcome and they would be breathing a little easier as the support continues to hold. We are approaching the corporate month-end so watch for USD demand today and tomorrow. This pair was bid all day today, which does hint at some USD demand flow being executed.

• Kyodo News via BBG - “Long-term interest rates rise to 1.625%, the highest level in 17 years: The yield on the newly issued 10-year government bond (379th issue, nominal interest rate 1.5%), which is an indicator of long-term interest rates, rose to 1.625% at one point, the highest level in about 17 years since October 2008.”
• (Bloomberg) - JGB traders see shorting long-term debt as the gift that keeps giving, with an assist from rising G-10 yields as well as Japan’s Ministry of Finance requesting a bigger budget for its debt financing needs. It’s a vicious cycle for JGBs -- the longer the Bank of Japan stalls in hiking interest rates, the more compensation investors demand for holding super-long bonds as stagflation fears rise.
• “HAYASHI: AKAZAWA VISIT TO THE US NOT DECIDED YET" - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 147.25($765m), 147.95($1.04bm), 148.00($997m).Upcoming Close Strikes : 145.00($1.17b Aug 29), 146.50($1.14b Aug 29), 147.50($806m Aug 29)  - BBG.
• CFTC data shows last week asset managers have begun to add to their JPY longs after a consistent period of reduction +71379( Last +60866), leveraged funds though again used the dip to add to their newly built short JPY position -50848(Last -41257).

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

RBA Governor Bullock noted that the vacancies/unemployment ratio was well off its highs and thus signalling that the labour market has eased. The quarterly ratio has been moving sideways for a year and remains above the historical average. However, monthly internet vacancies/unemployed appeared to stabilise in the 3 months to July around the series average. The SEEK new job ads index has moved sideways through most of 2025. 

Australia SEEK new job ads index 2013=100

• SEEK reported that July vacancies rose a seasonally adjusted 0.8% m/m but are still down 4.8% y/y. However, the 3-month annualised rate turned positive for the first time since July 2022, consistent with some stabilisation. SEEK notes that the trend posted two consecutive monthly increases for the first time since mid-2022.
• There was strong job ad growth in SA and WA and in the medical and hospitality sectors. SEEK observes that skill shortages persist in mining and renewable energy.
• June applicants-per-ad also appears to have peaked after trending higher since the May 2020 trough. In June the measure fell 4% m/m but is still up 9% y/y with 3-month momentum robust. Labour supply remains elevated.
• The stabilisation in vacancies is consistent with the S&P Global PMI which noted in the preliminary August composite report that there was increased hiring to fill a pickup in new orders. August employment is released on September 18.