HALISTER1: INSIDE ASIA: Asian Currencies Advance on Favorable U.K. Poll

INSIDE ASIA: Asian Currencies Advance on Favorable U.K. Poll

(Bloomberg) -- Most of the Asian currencies rally, with the kiwi & won leading advances, after a U.K. poll indicate that more Britons prefer to stay in the U.K., stoking risk-on sentiments. Sovereign bonds decline.
  • New Zealand dollar rises as much as 0.9%, Korean won gains as much as 0.8%, while the Indonesian rupiah led advances in Southeast Asia. Yen declined
    • “Expect polls to continue driving markets as volatility increases ahead of the judgment day,” according to a note from Oanda
  • A poll taken on Friday & Sat showed the campaign for U.K. to remain in the E.U. ahead by 3 percentage points
    • Some GBP option desks in Asia have ceased quoting until further notice to avoid the risks of being exposed to an event similar to SNB’s removal of the EUR/CHF floor, according to traders
    • Asia FX gains are tracking the decline in USD, says Christopher Wong, senior FX analyst at Maybank. Big gains in GBP are due to some easing of concerns over Brexit, and moves in the pound are expected to be whippy. Polls weren’t accurate in predicting election outcome last year, says Wong
  • Yen fell as much as 0.7%, snapping six days of gains
    • USD/JPY may rise between 1.00-1.50 yen while GBP/JPY could advance around 5 yen if U.K. votes to ‘remain’ in the EU: Daisaku Ueno, chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities
    • If U.K. votes to ‘leave’, GBP/JPY may drop 5 to 10 yen and USD/JPY could fall 2 to 4 yen; USD/JPY may test 100 yen
  • BOJ Governor Kuroda to speak this afternoon
    • Exports fell 11.3% in May, an eighth consecutive month of decline, leaving a trade deficit of 40.7b yen ($389m)
    • Yen will appreciate to 100 per dollar by year-end, Ex- MOF official Eisuke Sakakibara says in an interview
  • Australia 10-yr bond yield rises 5 bps to 2.13%, Japan 10yr govt. bond yield up 1 bp at -0.136%, same tenor’s yield in China steady at 2.95%
  • Rupee 1-month forwards drop after Reserve Bank of India Governor Rajan said Saturday he will leave once his term ends in Sept
  • Malaysia’s ringgit and the Korean won are set to be the biggest winners or the worst losers in Asia when the U.K. votes, according to an analysis by Bloomberg
    • South Korea today reports May PPI dropped 3.1% y/y vs revised -3.0% in April
    • Govt’s restructuring plan, while necessary, will likely dampen domestic demand in 2H, Goldman Sachs wrote in June 17 note; continues to expect another 25-bp rate cut in 2H, though mkts pricing in only a 50% chance of another rate cut
  • Aussie and kiwi rise with sterling
    • Benchmark iron ore prices rose Friday for third consecutive day, up 0.7% to $51.05
    • If Britain leaves EU, commodity prices will fall, and AUD/USD should decline by 2-3% on Friday, CBA says today; if U.K. votes to remain, AUD/USD could rally by 1-2%
    • Westpac 2Q consumer confidence falls to 106 from 109.6 in 1Q
    • N.Z. PSI index declines to 56.9 from upwardly revised 57.8 in April
  • Yuan gains after PBOC raises the reference rate; Shanghai stocks fall
    • CICC revises end-2016 USD/CNY forecast to 6.68 from 6.76; says less room for Fed hikes given anemic U.S. labor mkt; but cuts 2016 China GDP growth forecast to 6.7% vs 6.9%
    • PBOC will probably defend to USD/CNY at 6.60, cap volatility, says Khoon Goh, senior FX strategist at ANZ
    • Home prices rise in fewer cities in May vs April; avg new home price growth slows first time since Oct.
  • Rupiah lead advances in Southeast Asia
    • Bank Indonesia sees June inflation at 3.41% y/y, lower than during previous fasting months, due to weak demand
    • IDR bonds are likely to remain resilient due to positive domestic dynamics, ANZ said in note dated June 17
  • Ringgit gains, benefiting from improved risk sentiment, says Khoon Goh, senior FX strategist at ANZ; Stronger performance for oil prices on Friday also helped push the ringgit stronger at the open
  • Baht rises for the second day
    • BOT is likely to keep policy rate on hold at 1.50% this week due to faster-than-expected economic growth in 1Q and as inflation is expected to trend higher, Standard Chartered says in note today
    • Thai King’s health continues to improve, royal palace says on June 19
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Christopher Wong (Malayan Banking Bhd)
Daisaku Ueno (Mitsubishi UFJ Financial Group Inc)
Eisuke Sakakibara (Aoyama Gakuin University)
Khoon Goh (Australia & New Zealand Banking Group Ltd)

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