KRW: USD/KRW Remains Stuck In A Range
1 month USD/KRW dipped towards 1306 in early EU/London trading late yesterday but couldn't test below this level. We spent much of the overnight session grinding higher, closing in NY just above 1310. Note spot closed yesterday at 1307.90.
- Whilst the equity lead is negative from US markets overnight, US futures, particularly for tech (+1%), have opened up much firmer this morning on the back of more positive guidance post the US close from a number of companies. This could offset some of the overnight damage (the SOX dipped -1.6%, MSCI IT -1.8% overnight).
- To recap, the Kospi gained 0.4% yesterday, while offshore investors shed -$38.8mn in local shares. Flow trends have been moderate since the start of this week though, so don't appear to be a key driver of Korean won performance.
- Also, Tech company, SK Hynix, Q2 profits were better than expected on resilient chip demand and the weaker won. Other company earning results could also impact sentiment today.
- Earlier, South Korean consumer confidence fell sharply to 86.0, from 96.4 in June. This is lows going back to late 2020. 12 month ahead inflation expectations continued to surge as well, up to 4.7% versus 3.9% last month.
- Early tomorrow manufacturing and non-manufacturing sentiment publishes.
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JGBS: J.P.Morgan Recommend Going Long 30-Year ASWs
Late on Friday J.P.Morgan noted that “in the ASW space, we find the 30-Year ASW attractive at the current level. Regionals’ demand to buy super-long end ASW is likely to come back as their macro add-on balances decline. We therefore recommend going long 30-Year ASW.”
JGBS: Futures Marginally Cheaper Overnight, Operating In Wide Range
JGB futures ultimately cheapened in the final overnight trading session of last week, with the contract operating in a relatively wide ~30 tick range, unwinding early post-Tokyo gains as U.S. Tsys cheapened through the session. That left JGB futures -2 come the close of overnight dealing.
- There could be a downward bias observed at the futures re-open, with Japanese equities set to follow Friday’s U.S. equity rally and U.S. Tsy futures operating a touch below Friday’s settlement levels as of typing.
- The summary of opinions from the BoJ’s latest MPM provide the highlight of Monday’s domestic docket.
JPY: Better Risk Sentiment Dents Yen Friday, Focus Turns To BoJ Summary Of Opinions
A turnaround in risk appetite allowed USD/JPY to eke out some gains on the last trading day of last week. The rate was supported by firmer U.S. Tsy yields, with a firm rebound in the equity space aiding broader sentiment.
- USD/JPY 1-month risk reversal moved out of sync with the spot rate on Friday, plunging deeper into negative territory, suggesting that options traders are increasingly bearish.
- Spot USD/JPY last deals at Y135.18, down 5 pips on the day. Initial bullish focus falls on Jun 22, 2022 high/Oct 30, 1998 high of Y136.71/136.88. On the flip side, a retreat under Jun 23 low of Y134.27 would bring key support from Jun 16 low of 131.50 into play.
- PM Kishida is in Germany, where he takes part in a G7 summit and prepares to attend a NATO summit later this week. Both events are set to be dominated by Russia's invasion of Ukraine, although geopolitical matters related to the Indo-Pacific are also on the agenda.
- Participants are on the lookout for the summary of opinions from the BoJ's most recent monetary policy meeting, when the Board decided to stick with their ultra-loose policy settings despite the market testing their resolve. The document will be published shortly.
- Local data calendar is light today, with releases set to pick up in a couple of days. Retail sales (Wednesday), flash industrial output (Thursday) as well as unemployment, Tankan Survey & Tokyo CPI (Friday) headline this week.
