NZD: Softer Risk Appetite Keeps Downside 0.5700 Level In Focus, Q3 CPI On Monday
NZD outperformed AUD for Thursday's session, but couldn't test above 0.5760 versus the USD, which remains a near term resistance point. We track near 0.5730 in early Friday dealings (after little net change for Thursday). Broader risk off in the US equity space, (SPX was down 0.63%), helped offset the lower US Tsy yield backdrop, which benefit traditional safe havens like JPY, CHF rather than the Kiwi.
- Downside focus will rest on a move back under 0.5700 for NZD/USD, with Oct 14 lows at 0.5683. Below low, earlier 2025 lows in the 0.5500/0.5600 beckon. On the topside, the 20-day EMA is around 0.5780/85.
- The market has been happy to fade NZD/USD upticks, given the softer local data backdrop. Such biases are likely to be reinforced if broader risk appetite remains shaky. NZD/JPY is close to the 86.00 level, with earlier Oct lows near 85.30/35 a potential downside region to focus on.
- NZ-US 2yr swap spreads have been choppy but sit close to recent lows, last around -85bps. Outside of US yield moves, focus will be on next Monday's Q3 CPI print. The RBNZ has been expecting it to reach the top of its 1-3% band since its August forecast update and 3% seems to be where economists project it to print. Underlying CPIs are expected to remain within the top half of the band though. A 25bp rate cut is expected in November but if inflation prints materially below consensus then 50bp may be considered. The easing outlook may become clouded if inflation appears more persistent though.
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ASIA: Government Bond Issuance Today
- Bank of Korea to Sell KRWW1.5tn 3-Year Bonds
- Vietnam To Sell VND 9.0Tln 2035 Bonds; (TD2535028)
- Vietnam To Sell VND 1.0Tln 2030 Bonds; (TD2530010)
- Vietnam To Sell VND 3.0Tln 2040 Bonds; (TD2540037)
- Vietnam To Sell VND 0.5Tln 2055 Bonds; (TD2555052)
- Thailand to Sell THB20bn of 2045 Bonds
- Bank Indonesia to Sell 31D SUVBI Bills
- Bank Indonesia to Sell 276D SUVBI Bills
- Bank Indonesia to Sell 91D SUVBI Bills
- Bank Indonesia to Sell 367D SUVBI Bills
- Bank Indonesia to Sell 185D SUVBI Bills
- China to Sell CNY35bn 2045 Bonds
- China to Sell CNY20bn 28-Day Bills
- India to Sell INR100bn 91-Day Bills
- India to Sell INR60bn 182-Day Bills
- India to Sell INR50bn 364-Day Bills
ASIA: Coming Up in Asia Today
| 0130GMT | 0830HKT | 1030AEDT | Singapore Non-Oil Domestic Exports YoY AUGUST |
| 0130GMT | 0830HKT | 1030AEDT | Singapore Electronic Exports YoY AUGUST |
| 0820GMT | 1520HKT | 1720AEDT | Indonesia BI - Rate |
source: Bloomberg Finance LP / MNI
JPY: USD/JPY - Approaches FOMC Testing 146.00 Support Area
The overnight range was 146.28-147.26, Asia is currently trading around 146.50. USD/JPY came under pressure as the USD trades very heavy heading towards 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 ?
- MNI POLICY: BOJ Sees Minimum Wage Hike Bolstering CPI. Bank of Japan officials expect upcoming administrative minimum wage hikes to lift pay for workers near the threshold, adding pressure on regular wages and reinforcing the foundation for achieving the 2% inflation target in fiscal 2026, MNI understands.
- (Bloomberg) - “For the first time in three years, monetary policy and positioning appear to be aligned in signaling yen gains, yet bulls should beware of political disruption.”
- “Japan pushed back against a US call to ramp up pressure on Vladimir Putin by raising levies on China and India for importing Russian oil.” - BBG
- 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.
- CFTC data shows last week asset managers again added to their JPY longs again as they look to rebuild their position +87239( Last +78427), leveraged funds reduced their short position perhaps losing confidence the support will continue to hold -49591(Last -66914).
- Data/Event : Trade Balance
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
