INSIDE ASIA: Won, Ringgit Lead Asia Currencies on Risk Sentiment
(Bloomberg) -- The won and the ringgit led gains in Asian currencies as better-than-expected U.S. job data spurs risk sentiment.
- Relief seen in Asian currencies after non-farm payroll data on Friday suggests the labor market remains well, while suggesting the Fed won’t be in a hurry to raise rates, says Masashi Murata, FX strategist at Brown Brothers Harriman;
- Focus is turning to China’s economy, with expectations that 2Q GDP q/q growth will be better than 1Q, which would help sentiment in Asia; data expected this week include GDP, trade and factory output
- Won surges as much as 1.6% to a a more than two-month high, while Malaysian ringgit rallies as much as 1.3%; equities in Asia also jump
- Yen falls for the first day in five
- PM Abe’s conservative coalition won for the upper house election, with Abe telling NHK he wants comprehensive, bold economic steps compiled quickly
- Pressure on BOJ Governor Kuroda to expand monetary policy has eased following Abe’s victory, says Takahiro Sekido, Japan strategist at Bank of Tokyo-Mitsubishi UFJ
- Focus on policymaker dialogue about economic policy package ahead of next Diet session, and this could alleviate concerns in wake of Brexit
- USD/JPY will likely keep dropping to 98 toward end-2016
- Aussie, kiwi drop
- Prime Minister Turnbull declared victory in election, though it remains unclear if his Liberal-National coalition has enough seats to form a majority govt
- AUD/USD upside will be somewhat limited because RBA is expected to cut rates by 50 bps in 2016, CBA says today
- Leveraged funds’ net AUD position turned long in week ended July 5 for first time since end-May; net NZD long position increased to highest since April 2013
- Yuan is mixed, with the currency falling onshore, while gaining in offshore market
- June PPI fell 2.6% vs May’s 2.8%; CPI rose 1.9% vs 2% in May, according to data released yesterday
- June data eases pressure for China to provide more stimulus to fight deflation: ANZ
- Further direction of inflation depends on how far food prices would go after recent floods and whether capital outflow would prompt PBOC to add liquidity in 2H, says Helen Qiao, chief Greater China economist at BofA
- PBOC may ease further in 2H to offset outflows through OMO operation and RRR cut; interest rate cut likely at yr-end should other measures not be sufficient
- China is seeing its worst flooding since 1998, which has affected Jiangsu and Hubei, two of its most industrialized provinces
- Won advances as Kospi index rises in line with global stocks
- RBS expects BOK to cut policy rate by 25 bps in Aug, if BOJ moves in July, or to cut in Oct. if BOJ moves in Sept
- Southeast Asia currencies gain, with global funds net buyers of local Thai debt and equities on Friday, while there was also net inflow into equities in Philippines last week
- Japan 10-year govt. bond yield little changed at -0.278% U.S. 10-year Treasury yield steady at 1.3729%; China 10-year sovereign yield up 2 bps to 2.820%
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Helen Qiao (Merrill Lynch Asia Pacific Ltd)
Masashi Murata (Brown Brothers Harriman & Co)
Takahiro Sekido (Bank of Tokyo-Mitsubishi UFJ Ltd/The)
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