KRW: USD/KRW Still Close To Recent Highs, US-South Korea Trade Talks Progressing
Spot USD/KRW sits back near 1430/31 in early Wednesday dealings, down slightly from end Tuesday levels (recent highs in the pair marked at 1435.35). Any probe of these highs may bring intervention risks back into play (or a return of FX jawboning). This move lower today has been aided by USD/JPY, which is off 0.15% to be back around 151.70./75. For the won we are only 0.10% firmer so far today and still comfortably above recent lows (near 1414), while the 20-day EMA is close to this level as well (having trended higher in Oct to date).
- Headlines crossed earlier that suggest the US-South Korea trade deal is inching closer to a positive resolution: Via BBG: *S.KOREA'S KIM: TO VISIT US TO DISCUSS 1-2 OUTSTANDING ISSUES". Earlier, "The newspaper said South Korea and US agreed to phased $350b investment for years but have yet to reach a consensus on the cash portion of the package as the US is still requesting a significant amount of cash investment") citing local paper DongA Ilbo (also via BBG)
- Depending on the nature of resolving these issues, particularly from an FX flow standpoint, we could see some relief for USD/KRW, although markets are likely to be largely expecting a resolution at this stage.
- In the cross asset space, local equities are around flat in early Wednesday dealings, in line with US trends from Tuesday. Offshore investors have been modest net sellers of local equities in recent sessions.
- Earlier on the data front, the Sep PPI rose 1.2%y/y (from 0.6% prior) supporting, at the margin, an on hold BoK outcome tomorrow.
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CHINA PRESS: Listed Companies To Cut Deposits For Wealth Management Products
Listed companies will likely continue to move their deposits into wealth management products, with the scale reaching hundreds of billions of yuan in the next year, Yicai.com reported citing analysts. In the past year as of Sept 21, listed companies have announced a total CNY373.4 billion of entrusted wealth management, according to data by Choice Terminal. Currently, the one-year fixed deposit interest rate has dropped to 0.95%, while the average annualised yield of bank wealth management products has reached 2.12%, coupled with the general rise in major stock market indices, the newspaper said noting the significant yield gap. Investors are also increasingly adopting overseas wealth management through QDII and Southbound Connect, the newspaper added.
FOREX: Cross JPY - Move Higher Stalls, NZD/JPY Leads
US Equities, just another day and another all-time high, nothing stops this train. This morning US futures have opened a little lower on the H-1b visa story, E-minis -0.15%, NQU5 -0.10%. The JPY crosses could not follow through with their upward momentum as the move stalled to end the week with no clear direction from the BOJ.
- EUR/JPY - Friday night range 173.58 - 174.17, Asia is trading around 173.90. The pair has failed to extend its break back above 174.00 and should buyers not return imminently then the risks of a retracement increase. First support seen back towards the 173.00 area.
- GBP/JPY - Friday night 199.22 - 199.93, Asia trades around 199.60. This pair also could not extend its break higher and has failed again above 200.00. Buyers need to reassert the momentum higher again soon or the probability of a deeper pullback increases. First support seen back towards the 198.00 area.
- NZD/JPY - Friday night range 86.49 - 86.96, Asia is currently dealing 86.70. The pair remains the outlier thanks to the poor NZ GDP data last week, while below 88.00/88.50 I continue to have a bias lower. Anyone looking for a vehicle to express a long JPY in the crosses should be looking here, if cross JPY moves lower this pair should lead.
- CNH/JPY - Friday night range 20.7407 - 20.8275, Asia is currently trading around 20.8200. This pair has remained above its pivotal 20.30/20.40 support. The pair continues to trade comfortably within its recent 20.40-21.00 range.
Fig 1 : NZD/JPY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
CHINA PRESS: Stabilising Prices Require More Efforts To Boost Demand
Weak demand is blunting the impact of measures to curb excessive competition, which have only lifted producer prices moderately, Guan Tao, global chief economist at BOCI China, wrote in an article published on Yicai.com. Guan urged authorities to step up efforts to support demand through job creation, investment expansion and timely policy adjustments. He suggested the government consider hiring college graduates who have been unemployed for several years to collect labour and consumption statistics, noting the youth jobless rate for those aged 16-24 rose 0.1 percentage point year-on-year to 18.9% in August, the highest since records began.
