JPY: Asia Wrap - USD/JPY Pressing 146.00 Support Into FOMC
The USD/JPY range has been 146.21 - 146.61 in the Asia-Pac session, it is currently trading around 146.50, +0.03%. USD/JPY came under pressure overnight as the USD trades very heavy heading into the FOMC. The price is now just above the support of its recent 146-149 range, and we need a convincing break to see a clearer direction again. CFTC data shows leveraged funds paring back some of their short JPY position last week but remain core short, looking for this support to continue to hold. A move back below 145/146 is needed to potentially start seeing these positions being flushed out. Can the FOMC or the BOJ this week be that catalyst ?
- (Bloomberg) -- “RBC BlueBay Asset Management has taken a long yen position, betting that Japan’s political transition and a possible Bank of Japan rate hike in October could drive further strength in the currency. BlueBay’s chief investment officer Mark Dowding said the firm would also consider shifting to “go long duration” if Shinjiro Koizumi wins the LDP leadership race, and the BOJ follows through with a rate hike.”
- "Japan’s GPIF is making its first direct investment in domestic alternative assets." - BBG
- MNI Brief: Japan Aug Exports Post 4th Straight Drop: Japan’s exports fell for a fourth straight year-on-year decline in August, down 0.1% after July’s 2.6% drop, as shipments of automobiles and iron, and steel products were hit by U.S. tariffs. The data is unlikely to prompt the BOJ to alter its view that exports remain broadly flat as a trend.
- Solid Demand Metrics For 20Y Auction: The 20-year JGB auction delivered solid results across key metrics. The low price outperformed dealer forecasts, which were set at 97.80 according to a Bloomberg poll. Moreover, the cover ratio jumped to 3.9974x from 3.0853 in the previous outing and the auction tail shortened to 0.10 from to 0.13
- Options : Close significant option expiries for NY cut, based on DTCC data: 145.70($1.22b), 146.85($861m), 148.00($567m). Upcoming Close Strikes : 145.00($1.48b Sept 19), 146.40($797m Sept 19) - BBG.
Fig 1 : USD/JPY Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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US TSYS: Asia Wrap - Yields Leak Lower
The TYU5 range has been 111-19 to 111-24 during the Asia-Pacific session. It last changed hands at 111-23+, up 0-04+ from the previous close.
- The US 2-year yield has edged lower trading around 3.742%, down 0.01 from its close.
- The US 10-year yield has edged lower trading around 4.304%, down 0.01 from its close.
- Yields extended higher on Friday, approaching the pivotal resistance area within the greater 4.10%-4.65% range. The 4.35% area in 10-Year yields should still see demand initially, but the way the market keeps bouncing off levels just below 4.20% will be disconcerting for longs..
- Fortune - “Wall Street overwhelmingly expects the Federal Reserve to cut rates next month, and Chairman Jerome Powell’s speech on Friday will give him a chance to hint at which direction policymakers are headed. But some analysts don’t think a September rate cut is in the bag, and even some that do expect a cut are doubtful that Powell will tease it at Jackson Hole.”
- Daily Chartbook on X: "On the surface: steady and solid consumer momentum. Under the hood: a rising share of sales growth is being 'paid for' by inflation."@Econ_Parker. See Fig.1 Below.
- Data/Events: New York Fed Services Business Activity, NAHB Housing Starts
Fig 1: Retail & Inflation
Source: MNI - Market News/@dailychartbook/Arch
CHINA: Bond Futures Fall in Weak Start to the Week
- China's bond futures are down in the morning session, with their biggest one day fall since May.
- The 10-year is down -0.32 at 108.00, taking it further below all major moving averages. The nearest, the 20-day EMA, is at 108.45.
- The 2-year bond future is down -0.04 at 102.30. Having approached the 20-day EMA of 102.36, today's falls see it move further below.
- The CGB10 year continues to drift higher, following on from moves on Friday. Having finished Friday at 1.74%, it is up +3bp today at 1.77%, the highest level of the month.
ASIA STOCKS: Most Markets Higher, China Outperforms, South Korea Weaker
Asian equity markets are mostly on the front foot in the first part of Monday dealings, although there are some pockets of weakness. The lead from US markets on Friday was softer, particularly in the tech space. US futures are up a touch in the first part of Monday dealings, while EU futures are also higher. Market attention remains on US-Ukraine talks later, with focus on whether a peace deal to end the Russia-Ukraine conflict can be reached. The knee-jerk reaction from any peace deal reached is likely to be positive for risk appetite.
- China markets are outperforming, particularly given a flat HSI backdrop in Hong Kong. The CSI 300 was last up a little over 0.90%, putting the index near 4240, which is fresh intra-session highs back to early Oct last year. Hopes of fresh stimulus after disappointing July data is aiding sentiment, while there is also talk of outflows from bonds into equities. US President Trump also stated late last week that he will hold off raising China tariffs over their Russian oil purchases.
- Japan markets are higher, the Topix +0.55%, the NKY 225 up close to 0.90%. The Topix transport sub index is up close to 1.50%, continuing a recent solid run.
- South Korean markets have returned after Friday's break and are off over 1%, putting the Kospi back under 3200. Taiwan stocks are holding up better, despite a Friday slump in the US SOX index.
- Australia's markets is around flat, as we sit near record highs.
- In South East Asia, trends are mixed. Singapore is softer, but Malaysia and the Philippines have ticked higher. Indonesian markets are out today.
