FOREX: USD/JPY Off Post BoJ Highs, A$ & NZD Still Higher

Better than expected China PMI data gave the onshore bourses a boost today, whilst the Hang Seng declined modestly on what was seemingly profit taking.  

• The Hang Seng is down -0.10% whilst the CSI 300 rose +0.22%, the Shanghai Comp +0.40% and Shenzhen up +0.47%.  
• The NIKKEI returned to a modest rally of +0.16% having fallen two successive days after reaching new all time highs last week.  
• The KOSPI is down modestly by -0.06% after yesterday's very strong gains of +1.3%.  
• The TAIEX was closed yesterday and responded today with gains of +1.37%.
• The FTSE Malay KLCI is up +0.45% and on track for three days of gains.  
• The Jakarta Composite is down -0.33% giving back yesterday's gains.  
• The NIFTY 50 finished yesterday marginally down for a seventh day of losses.  It is doing very little in Tuesday morning trade, up just +0.06%.  

NZGBs closed 2bps cheaper across benchmarks. It is noteworthy that the local market was closed at the time of the RBA decision, so any negative spillover will be reflected in early trade tomorrow.

• ANZ business confidence for September was little changed at 49.6, while the activity outlook rose to 43.4 from 38.7. Past own activity rose 4 points to +5, signalling that growth is improving from Q2’s sharp contraction but remains lacklustre.
• Inflation expectations rose 0.1pp to 2.7% with a net 46% expecting to increase prices over the coming 3 months (+3pp) and an increase in costs. Employment compared to a year ago improved marginally but remained negative at -10.9, in line with other data signalling that the labour market is weak.
• The RBNZ is expected to ease at both its October and November meetings, and the monthly data pointing to continued soft growth are in line with this.
• RBNZ dated OIS pricing closed showing 33bps of easing for October, with a cumulative 62bps by November 2025.
• Tomorrow, the local calendar will see Building Permits data.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond and NZ$200mn of the 4.50% May-35 bond.

ACGBs (YM -5.5 & XM -1.0) have bear-flattened to session cheaps after the RBA leaves the cash rate unchanged at 3.360%, as widely expected.

• The RBA unanimously set the cash rate at 3.60%, stressing its commitment to achieving price stability and jobs growth. The board judged it appropriate to remain cautious given uncertainties. The housing market is strengthening, private demand is recovering faster, and domestic economic activity is rebounding, though the outlook remains uncertain. Labour market conditions are tight with low underutilisation, but productivity growth is weak. Inflation uncertainty persists, with recent data suggesting third-quarter inflation may be higher than expected, while underlying inflation’s decline has slowed. The RBA affirmed its policy is well placed to respond decisively to global events.
• Cash US tsys are slightly cheaper, with a slight steepening bias, in today's Asia-Pac session after yesterday's bull-flattener.
• Cash ACGBs are 1-5bps cheaper with the AU-US 10-year yield differential at +20bps.
• The bills strip is -5 to -7 across contracts.
• RBA-dated OIS pricing is 2-6bps firmer across meetings after giving a 25bp rate cut today a 3% probability. A cumulative 12bps (17bps pre-RBA) of easing is priced by year-end.
• Tomorrow, the local calendar will see Cotality Home Values and S&P Global PMI Mfg (F).
• The AOFM plans to sell A$1200mn of the 3.50% 21 December 2034 bond.