KRW: USD/KRW Can't Break Late Sep Lows, Local Equities Up Despite US Losses

In Tokyo morning trade, JGB futures are slightly weaker, -2 compared to settlement levels.

• Japan headline Aug trade figures were mixed. Exports were -0.1%y/y, against a -2.0% forecast (-2.6% was the July outcome). On the import side, we fell -5.2%y/y, against a -4.1% forecast and -7.4% prior outcome. The trade deficit was -242.5bn, against a -512.6bn forecast, while July's print was -118.4bn. In seasonally adjusted terms the trade deficit was -150.1bn, which was also better than forecast, but sub recent cycle highs for the balance (+166.5bn in Feb).
• Tariff impact was seen, with exports to the US down -13.8%y/y. To the EU exports rose 5.5%y/y, while to China exports were down a modest -0.5%y/y. The trade surplus Japan has with the US narrowed to 324bn. In Feb this year the surplus was at 918.5bn.
• Automobile exports fell 7.9% in August, the fifth consecutive decline following an 11.4% fall in July. Iron and steel exports dropped 14.9%, easing from July's 21.0% fall. Auto exports to the US fell by 28.4%.
• Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest rally.
• Cash JGBs are flat to 2bps cheaper across benchmarks. The benchmark 20-year yield is 1.0bp higher at 1.611% ahead of today’s supply.
• Swap rates are ~1bp higher. Swap spreads are mixed.

Westpac’s lead index signalled slowing growth in August with the 6-month annualised rate turning negative (-0.16% down from July’s +0.11%) for the first time since September 2024. Almost all variables have eased over the last 6 months. It is signalling that growth on a 2q/2q basis could slow over the coming quarters. 

Australia growth outlook %

Source: MNI - Market News/LSEG

• Westpac is forecasting Australian GDP growth of 1.9% in 2025 up from 2024’s 1.3% with it returning to trend next year. Its Card Tracker suggests that private consumption slowed over Q3 to early September. It expects the RBA to be on hold in September but then ease 25bp in November and twice more in 2026.
• Westpac consumer unemployment expectations has been the largest contributor to the moderation in the lead index over the last half year. It rose 4.6% in September’s consumer sentiment survey to the highest in a year and just under the series average. Thus it and confidence (-3.1% m/m Sept) are likely to continue to weigh in the next lead index.
• Commodity prices in AUDs, Westpac consumer sentiment and dwelling approvals also contributed to the moderation. Hours worked, the yield spread and US IP also made slight negative contributions with only Australian equities positive. 

• The PBOC issued CNY418.5bn of 7-day reverse repo at 1.4% during this morning's operations.
• Today's maturities CNY304bn.
• Net liquidity injects CNY114.5bn.
• The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
• The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.49%, from prior close of 1.49%.
• The China overnight interbank repo rate is at 1.51%, from the prior close of 1.46%.
• The China 7-day interbank repo rate is at 1.57%, from the prior close of 1.50%.