NZD: Asia Wrap - NZD/USD Drifts Higher In Quiet Session

Asia Pac markets are mixed in the first part of Wednesday trade. There have been lots of headlines around Tsunami warnings stretching across Asia Pac to the US, after a very large earthquake struck off the coast of Russia. Market impact in the equity space has been limited so far, with markets awaiting damage done in aftermath of any large Tsunami's that reach major coastlines. US equity futures are a little higher, but this comes ahead of the FOMC later, which is likely to keep interest light ahead of this risk event. 

• Japan markets are a touch firmer, with the Topix up close to 0.30% in latest dealings, while the NKY 225 is around flat. Yen strengthened modestly on the tsunami headlines but has seen little follow through. Authorities have noted the tsunami risk could remain in place for the next day.
• China and Hong Kong markets are mixed. The HSI is off 0.40%, while the CSI 300 continues to rally, last up 0.50% to 4170/75. This is fresh highs back to Nov last year for the index. Positive tones around US-China trade talks are likely helping, while the government's efforts to remove excessive competition in certain sectors is also likely being seen as a positive for the profit outlook.
• South Korea's Kospi is up over 1% as the index extends its break above 3200. President Lee noted earlier that the government will become pragmatic and more market orientated, while also looking to abolish unnecessary regulations. Taiwan stocks are also higher, recovering most of yesterday's dip, the Taiex last near +0.90% firmer.
• In South East Asia, most markets are down, albeit modestly. Indonesia's JCI is down around 0.70%.  Thailand's SET is the exception, up +0.35%. The MOF nudged up the 2025 GDP forecast, but lowered its inflation projection, which should be conducive for easier BoT policy settings.
• India stocks are a little higher, after underperforming recently. US President Trump stated yesterday that the country may see a 20-25% tariff rate, although this isn't final. 

The NZD/USD had a range of 0.5952 - 0.5972 in the Asia-Pac session, going into the London open trading around 0.5965, +0.15%. The pair found some demand around the 0.5950 area and has consolidated around here as we await the FOMC tomorrow morning. There is lots of event risk coming up this week that could all impact the risk backdrop significantly. Support now seen back towards the 0.5850/0.5900 area.

•  NEW ZEALAND: ANZ Business Survey Signals Continued Lacklustre Recovery. The ANZ survey showed little change in business confidence and the outlook in July with the former rising 1.5 points to 47.8 but the latter falling 0.3 to 40.6. It signals that the recovery continues but at a gradual pace.
• RNZ - “Westpac chief economist Kelly Eckhold said it was good for the country overall that dairy prices were high. "Exports of cheese are $3 billion. All these dairy products are rising for the same underlying reason - demand for milk fats is increasing. Butter and cheese in particular are the things the world wants."
• "Prices are being bid up by people overseas who are wealthier than us and their incomes are growing more strongly. "That's why they can afford to pay the prices that are pushing the prices up. The question isn't should we be redistributing further the profits from those sectors. The question should be what can we do to improve the incomes of Kiwis so when demand goes up overseas we can keep pace.”
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6000(NZD395m). Upcoming Close Strikes : 0.5965(NZD474m July 31). - BBG
• CFTC Data shows Asset Managers again reduced their newly built longs in NZD +5034(Last +8192), the Leveraged community added slightly to their shorts last week -7328(Last -6744).
• AUD/NZD range for the session has been 1.0910 - 1.0940, currently trading 1.0925. The cross moved higher in response to the NZ CPI. Dips back to 1.0850/1.0900 should continue to find support as the pair tries to build momentum to move higher. 

Fig 1: NZD/USD Spot Daily Chart

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

The Asia-Pac USD/JPY range has been 147.85 - 148.53, Asia is currently trading around 148.10, -0.25%. USD/JPY has drifted lower in sympathy to the SGD move after the MAS held policy unchanged. These headwinds were added too by headlines of a huge Earthquake just off the Russian coast that led to Tsunami warnings in the Pacific. First support seen back towards 146.00/147.00. A move back above the highs for July would turn the focus towards the pivotal 151.00/152.00 area.

• "Japan issued a tsunami warning after a powerful earthquake off the eastern coast of Russia on Wednesday morning local time. Tsunami warnings have been issued for Hawaii and parts of Alaska, and a tsunami watch is in force from the California-Mexico border to Chignik Bay, Alaska, according to the US National Weather Service’s Tsunami Warning System.” - BBG
• BOJ MNI BoJ Preview - July 2025: Focus On Presser After Trade Deal: The BoJ is widely expected to keep its policy rate unchanged at 0.5% for a fourth consecutive meeting, amid signs of easing trade-related uncertainty since its June meeting. Most analysts continue to expect the next rate hike to occur in late 2025 or January 2026. However, timing remains fluid.
• Markets will pay close attention to Governor Ueda's tone during the post-meeting press conference. Ueda has maintained a cautious stance since May, but if the forecasts and risk assessments are revised higher, there's a high likelihood his tone may shift.
• However, with OIS markets pricing in a 65% chance of a 25bp rate hike by end-2025, the bar for a hawkish surprise is high. As a result, even a mild shift in tone could be interpreted as dovish, relative to expectations.
• Options : Close significant option expiries for NY cut, based on DTCC data: 146.65($823m).Upcoming Close Strikes : 149.00($1.16b July 30), 147.00($1.52b Aug 1), 146.00($1.43b Aug 1) - BBG.

Fig 1 : USD/JPY Spot Daily Chart

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