FOREX: Asia-Pac FX: USD Drifts Lower, Focus On Supreme Court Tariff Ruling

Gold made another record high during Tuesday’s APAC trading despite little change in either the US dollar or yields. Safe-haven flows continue to push bullion towards psychological round number support at $4000 given ongoing government instability in the US, Japan and France. Gold reached $3977.44/oz earlier but then fell to $3956.02. It is currently up 0.3% to $3974.5.

• The US shutdown appears no closer to a resolution although both sides are willing to talk but the issue may be forced as 14 October approaches, when military personnel will miss their first paycheck. Polymarket has higher odds of the shutdown lasting 10-29 days rather than more than 30. The impasse is delaying key US data increasing opacity at a time of economic uncertainty and as the Fed resumes easing.
• With no political group having a majority in the French parliament and an unwillingness to cooperate, instability is likely to continue. The latest PM, Lecornu, resigned on Monday but President Macron has asked him to find a solution. The situation has unsettled markets given France’s high deficit and debt positions.
• Policy under Japan’s new PM Takaichi is also uncertain given her desire to reduce the consumption tax and previous comments against BoJ rate hikes.
• ETF inflows and central bank purchases have driven a $600 upward revision to Goldman Sachs’s end-2026 gold projection to $4900/oz, according to Bloomberg.
• Silver is little changed at $48.55 after reaching $48.653 below Monday’s high of $48.767.
• Later the Fed’s Bostic, Bowman, Miran and Kashkari as well as the ECB’s Lagarde and Machado speak. September NY Fed 1-year inflation expectations and August Germany factory orders are released.

The USD/JPY range has been 150.24 - 150.62 in the Asia-Pac session, it is currently trading around 150.30, -0.03%. The pair looks to be consolidating its gains above 150.00 after the surge higher in reaction to Sanae Takaichi’s victory. The market's attention has quickly returned to a potential looser fiscal and monetary policy on this outcome and looks to be pushing back the likelihood of an imminent rate hike. With risk roaring higher this all feeds further into the carry trade, the focus will now turn toward the pivotal 151/152 area a break of which could potentially start another leg higher. Expect dips to now find support unless there is push back on the market's views of Takaichi’s policies. There was some jaw-boning today about FX moves but realistically I would not expect any action until we cross back above the 155 area.

• The last CFTC data available showed Asset Managers remained significantly long JPY, should these moves begin to gather momentum, they could be forced to first pare back their longs and then if significant levels are broken begin to rebuild JPY shorts. Many crosses are breaking through some pivotal areas(CNH/JPY Above 21.00) and unless the government says something to contradict the markets thinking these could begin to gather momentum.
• MNI - Household Spending Above Forecasts, Supports BoJ Hike Plans : Japan household spending for August was stronger than forecast (+2.3%y/y, versus 1.2% forecast, 1.4% prior). We are below earlier 2025 highs from a y/y momentum standpoint, but the trend has steadily improved from late 2024 lows. It should add, albeit at the margins, to the case for a further BoJ rate hike, although little is priced for the Oct meeting (implied rate of 0.52%, versus a current effective rate of 0.477%).
• "KATO: KEY FOR FX TO MOVE STABLY WHILE REFLECTING FUNDAMENTALS, REFRAINING FROM COMMENTING SPECIFICALLY ON MARKET MOVES" - BBG
• "SUZUKI: CAN'T IGNORE FISCAL DISCIPLINE, CAN'T ACHIEVE JAPAN GROWTH WITHOUT INVESTMENT” - BBG

• Options : Close significant option expiries for NY cut, based on DTCC data: 149.75($895m), 150.00($796m), 151.00($776m). Upcoming Close Strikes : 147.00($1.47b Oct 8) - BBG.

  Fig 1 : USD/JPY Spot Daily Chart

  

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

The AUD/USD has had a range of 0.6604 - 0.6624 in the Asia- Pac session, it is currently trading around 0.6620, +0.05%. The AUD has drifted higher, helped by the way risk continues to surge and probably some AUD/JPY demand as the JPY crosses look to break some big levels and look to regain the trend higher. A move back through the 0.6625/50 area is needed to gain the momentum to have another look toward the pivotal 0.6700 area.

• MNI AU - Stall In Disinflation Weighing On Consumer Confidence. Westpac consumer confidence fell for the second straight month in October as higher inflation prints appear to have weighed on assessments of family finances and the economy. Thus, Q3 CPI on 29 October is likely to be important for households too. The RBA’s decision to leave rates at 3.6% and cautious tone appear to have actually reassured consumers. Sentiment was down 3.5% m/m to 92.1, the lowest in 6 months. Households remain cautious but are prepared to spend at the right price. Q3 expenditure growth improved compared to Q2 with signs of a pickup in discretionary spending.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6735(AUD350m). Upcoming Close Strikes : 0.6300(AUD899m Oct 8 )- BBG
• AUD/JPY - Asia-Pac range 99.38 - 99.68, Asia is trading around 99.50. The pair has surged higher for good reason on the election outcome. With Risk surging higher at the same time the carry trade will start to be looked at again. Dips will now be supported as the focus now turns toward 100 and then beyond.

Fig 1: AUD/USD spot 2H Chart

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