THB: USD/THB Tracking Lower, Tight Link With Gold Persists
USD/THB is back under 31.70, up around 0.55% versus end Thursday levels. The pair is playing catch up with USD softness from Thursday's session (post the onshore close). In the past week, THB is up a little over 1.6% versus the dollar, the best performer in EM Asia FX over this period (TWD is next best at +1.25%). The pair is just above recent lows of 31.61, recorded on Tuesday.
- The chart below highlights the continued tight (inverse relationship) between USD/THB and gold prices. Via BBG: "Thai gold demand, excluding central bank purchase, is set to climb 10% this year to 53.7 tons, according to the Thai Futures Exchange. Demand in the first half jumped 21% to 20.7 tons, World Gold Council data show."
- It remains to be seen if the BoT/authorities can break or weaken this strong link.
- Local equities sit modestly higher in the first part of Friday dealings, the SET close to the 1300 level, which would be fresh highs back to early Feb of this year. Offshore investor inflows rebounded yesterday, but are still modestly weaker for the past week.
- Later on, we get weekly FX reserves data (for Sep 5), which may start to come under more focus given the continued push lower in USD/THB. Next week, we may get customs trade data towards the end of the week (for August).
Fig 1: USD/THB & Spot Gold Prices (Inverted)
Source: Bloomberg Finance L.P./MNI
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JGBS AUCTION: 5-Year Supply Shows Poor Metrics
Today’s 5-year JGB auction showed poor signals on demand. The low price came in below expectations of 99.72, and the bid-to-cover ratio declined to 2.9616x from 3.5411x. Meanwhile the tail widened slightly to 0.03 from 0.02.
- The result aligns with the poor demand signals seen at this month’s 10-year auction.
- With yields higher and the 2s/5s curve steeper than last month, today’s outcome represents a deterioration in overall demand conditions.
- In the aftermath, the 5-year sector is slightly cheaper in afternoon trading.
JGBS AUCTION: 5-Year JGB Auction Results
The Japanese Ministry Of Finance (MoF) sells ¥ 1,842.1bn 5-Year JGBs:
- Average Yield: 1.056% (prev. 0.989%)
- Average Price: 99.74 (prev. 100.05)
- High Yield: 1.062% (prev. 0.993%)
- Low price: 99.71 (prev. 100.03)
- % Allotted At High Yield: 67.7077% (prev. 6.9288%)
- Bid/Cover: 2.9616x (prev. 3.5411x)
FOREX: JPY Crosses - Push Higher As US Stocks Makes New Highs, GBP/JPY Tests 200
US Equities stormed to new all-time highs in the N/Y session as the market gears up for a potential series of rate cuts. This morning US futures have opened pretty muted albeit still at their highs, ESU5 -0.04%, NQU5 +0.03% The JPY crosses remain better bid as risk extends higher, GBP/JPY leads the move eyeing a test of 200.00.
- EUR/JPY - Overnight range 172.08 - 172.86, Asia is trading around 173.00. This pair bounced off its support just below 170.00 and has put a base in now around 170.00. While risk continues to trade positive this will remain bid now on dips.
- GBP/JPY - Overnight 198.13 - 200.08, Asia trades around 199.90. Risk has broken higher again overnight and there has been no sign of a pullback which has seen the pair blow through what should have been decent resistance. A move back above 200.00 could generate fresh impetus higher and dips back towards 198.50 should now find support first up.
- NZD/JPY - Overnight range 87.80 - 88.18, Asia is currently dealing 88.20. The pair found solid demand towards the 86.50 area, I felt sellers should remerge on a bounce back towards 88.50 first up but the price action in the other JPY crosses would make you question a fade for now. A sustained move back above 89.00 would reinstate the momentum higher.
- CNH/JPY - Overnight range 20.5518 - 20.6465, Asia is currently trading around 20.6100. This pair found solid demand back towards its first support area around 2.4000. A sustained break back below 2.3000 is needed to turn momentum lower again, until then dips will probably continue to be supported.
Fig 1 : GBP/JPY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
