CNH: USD/CNH Little Changed, Firmer Yen Helps Curb Upside Pressures
Dec-17 22:18
USD/CNH largely tracked sideways post the Asia close on Tuesday, albeit dipping back under 7.2900 towards the end of the NY session. We track near 7.2875 in early Thursday dealings, after little net change for Tuesday's session. The rebound in the yen likely aided CNH at the margins. Spot USD/CNY finished up at 7.2842 for Tuesday, also little changed. The CNY CFETS basket tracker (per BBG) edged down slightly to 100.28.
- BBG notes that state banks were reportedly USD sellers yesterday in the onshore market and also active in the swap market. Spot USD/CNY remains sub recent highs of 7.2972.
- This, coupled with the fixing bias, may help keep yuan losses contained into year end.
- Reuters headlines from yesterday pointed to an unchanged 2025 GDP growth target of 5%, but a wider fiscal deficit of 4% of GDP (this was broadly in line with onshore market expectations). Still, market expectations around the near term and 2025 growth outlook remain steady.
- We have the 1yr MLF and loan prime rate decision due before year end, so there is scope for easier policy settings between now and then.
- CGB yields paused in terms of recent downside momentum yesterday, while onshore equities were volatile but finished mixed, the CSI 300 up slightly, the Shanghai Composite down.
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NZD: AUD/NZD Continues Sideways Trading
Nov-17 22:18
- The AUD/NZD fell 0.13% to 1.1019 on Friday, and remains trading within recent ranges. The cross has been trading sideways since the start of October. Both currencies have fallen considerably over the past week, as disappointing China tariffs, concerns over Trump appointments impact on China and the overall strength of the USD push both currencies lower.
- The cross spent the past week trading in roughly a 40-pip range, and is trading down 0.15% for the week.
- The AU-NZ 2yr swap fell 4bps to 31bps on Friday and is well down from the highs made Nov 7 of 60bps.
- Looking at technical levels the cross has been trading in a 1.1000 to 1.1100 range, a break above the 1.1100 level is needed to open a move to test the yearly highs of 1.1144 (July 29). Key support is at 1.1000 (50-day EMA), a break below here would open a move to 1.0980 (Oct 28 lows).
- Expiries 1.1035 ($347m) for 19th NY cut
- The data calendar is light on today, with the RBA's Kent speaking after close
NZD: NZD/USD Breaks Losing Streak, Hovers Near Yearly Lows
Nov-17 22:16
- NZD/USD rose 0.27% to 0.5866 on Friday, ending a 5-day run of losing sessions. The pair fell 1.70% over the past week, and hit a new yearly low if 0.5840 while volatility increased slightly on Friday with the pair trading in a 60-pip range.
- The currency is now 8% off the highs made on Oct 1st and continues to hover just off the lows made last week. This is the third time over the past year the pair has reached these lows, with the prior to moves met with sharp reversals.
- Taking a look at technical levels, a clear break of last weeks lows would be needed to reach key support of 0.5774 (Oct 26 lows/ 2023 lows). Initial resistance is 0.5900 (Round number) a move back above here would see a test of 0.5960 (20-day EMA).
- RBNZ dated OIS pricing was little changed on Friday with 52bps of cuts priced in for November, down from a high of 59bps of cuts priced in prior week. Looking out to 2025 there are 87bps of cuts priced for Feb and 107bps by April, while further out the curve the market expects 128bps of cuts by Oct 2025.
- The US-NZ 2yr swap rose 1bp on Friday to -32bps and trades well off recent lows of -45bps
- Today's expiries are 0.5500 ($450m), 0.5835 ($628m), 0.5970 ($390m) November 18th cut
- Non Resident Bond Holdings at 1pm AEDT
JPY: USD/JPY Down Over 1%, Still Above 20-day EMA, All Eyes On Ueda Speech Today
Nov-17 21:40
The yen outperformed through Friday trade, up nearly 1.3%. From earlier highs at 156.75, the pair sunk sub 154.00 by the Friday NY session. We track near 154.25/30 in early Monday dealings. Despite this pullback we are still above the 20-day EMA support point, which comes in at 152.73.
- Yen was aided by the equity risk off through Friday, particularly in US markets. The SPX fell 1.32%, while tech stocks were off over 2.2%.
- Friday's US data saw a surge in the Empire manufacturing survey and better than expected retail sales. Front end US yields still finished off recent highs though, likewise for the 10yr, last at 4.44%.
- We were still higher for last week, the 2yr up around 5bps, the 10yr yield +14bps. Last week, Fed speak turned more cautious around rate cut prospects. US-JP yield differentials are providing less upside support to USD/JPY, but remain close to recent highs.
- Locally today we have Sep core machine orders. The market expects a 1.5%m/m rise (prior -1.9%). Greater focus will rest on BoJ Governor Ueda's speech.
- Rtrs notes the Governor will speak to business executives from the city at 10-11:30am local time (which is 0100-0230GMT), then will hold a press conference from 1:45pm-2:15pm local time (0445-0515GMT).
- Hints around the rate outlook will be eyed closely.
