MNI ASIA PAC Weekly Macro Wrap:

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Executive Summary:

JAPAN 

• Japan wage earnings were better than forecast, while headline PPI softened. Still, imported price pressures are likely to be a concern going forward given the spike in oil prices and a weaker yen. Verbal FX jawboning returned later in the week, but given the strong USD bid, intervention now may not give the authorities good bang for their buck. The BoJ is seen on hold next week, but risks are skewed towards tightening sooner rather than later. 

AUSTRALIA 

• Survey measures hinted at some early impact from the Iran conflict, but activity measures held up well. RBA tightening expectations for the March meeting rose notably this week, as we saw some hawkish RBA remarks in the context of inflation risks from rising oil prices and the limited spare capacity in the economy. 

NEW ZEALAND

• New Zealand data flow was light this week and too soon to show the impact of the Iran conflict. Next week we get Q4 GDP, which is now dated, but will give an update to the RBNZ in terms of end 2025 economic momentum and spare capacity in the economy. 

SHORT TERM RATES 

• Over the past week, interest-rate expectations across the $-bloc through December 2026 have firmed further in response to the Middle East conflict and its impact on oil prices, with moves led by the Canada (+28bps), followed by the US (+19bps), New Zealand (+14bps) and Australia (+11bps). This followed a 9-19bp firming the week before.

CHINA 

• China inflation was stronger than forecast for Feb, aided by LNY. Still, coupled with the surge in energy costs has likely pushed out the PBoC easing window. In turn, local yields have edged back up. Yuan outperformance in basket terms remains a dominant theme in the FX space.  

SOUTH KOREA

• South Korea is focused on managing financial stability, amid the external oil price shock. An extra budget seems very likely but the authorities are aiming to keep front end yields under control. USD/KRW remains close to 1500. 

ASIA 

• Fallout from the oil price surge continues throughout the region. Indonesia is likely to remain in focus, with local bonds and the currency potentially seeing further pressure if the 2022 scenario is a guide. 

ASIA EQUITY FLOWS 

• It has been a fairly consistent theme of net selling by offshore investors over the past week, albeit with a few days of net inflows into South Korea and Indonesia. Cumulative outflows stand at -$16bn for the past 5 trading days, as markets grapple with the oil price shock from the Iran conflict.