HALISTER1: INSIDE ASIA: Asian Currencies Slip Ahead of Yellen; Won Drops

INSIDE ASIA: Asian Currencies Slip Ahead of Yellen; Won Drops

(Bloomberg) -- Currencies in Asia decline as investors prepare for the possibility of Fed hike signals from Fed Chair Yellen’s speech later this week. Won falls after North Korea successfully launched a missile from a submarine.
  • Investors may be taking profit or getting hedged going into Yellen’s speech at Jackson Hole, says Kay Van-Petersen, Saxo Capital global macro strategist. Expects Yellen to keep her options open. See roundup for speech scheduled for Friday
  • Bloomberg dollar index advances for a fourth day, after purchases of new U.S. homes unexpectedly jumped in July to highest level in almost nine years
  • Won drops as much as 0.9%, before paring losses, after the missile launch, which came after North Korea threatened a pre-emptive attack on South Korea for a joint U.S. military exercise
    • East Asia’s foreign ministers of Japan, China and South Korea hold first formal talks in five years in Tokyo this morning
  • China 10-year govt. bond yield rises 2 bps to 2.76%, after gaining 5 bps yesterday; same tenor sovereign bond yield in Japan drops 2 bps to -0.095%
  • Yuan falls with regional peers, as PBOC injects more expensive longer-term liquidity to signal concern over short-term borrowing used to buy bonds
    • The central bank adds funds in 14-day reverse repos today, first time since Feb. 12-mo CNY IRS was little changed at 2.52% after climbing 7bps yday
    • PBOC’s actions today indicate it’s resistant to broad monetary easing including RRR cuts as that could increase yuan depreciation pressure, Scotiabank Asia FX strategist Gao Qi writes in a note
    • Charts here to show why China hasn’t eased
  • Yen falls
    • Unless Yellen sends a clear message that a Sept. rate increase is possible, dollar is more likely to weaken, says Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking
    • BOJ is expected to buy super-long-term govt bonds from secondary market today, which will support JGBs, according to note from Mitsubishi UFJ Morgan Stanley Securities
    • Cabinet office to release monthly economic report for August
  • Aussie and kiwi decline as oil and commodities drop
    • BNP Paribas remain bearish on AUD & NZD, anticipates a hawkish message from the Fed will drive a USD recovery and pressure commodity prices, according to note today
    • Still, Citigroup says Aussie and Kiwi will draw investors because they offer highest yields among peers
    • NZ July trade balance came in at NZ$433m deficit vs. estimated shortfall NZ$325m
  • Southeast Asian currencies including ringgit and rupiah fall
    • Emerging markets in Asia are “back peddling on heightened uncertainty over U.S. Fed monetary policy,” according to a note from Oanda. “When economic uncertainty increases, the FX risk and carry positions tend to do poorly, so emerging markets fall under pressure.”
    • Ringgit is in its longest-losing streak in about a month as oil declines, with data showing U.S. stockpiles gaining to keep inventories at highest seasonal level in at least 30 years
    • Philippines imports in June probably rose 13.8% y/y after a 39.3% gain in May, according to median est. in Bloomberg survey; data due 9am local time tomorrow
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Kay Van-Petersen (Saxo Bank A/S)
Etsuko Yamashita (Sumitomo Mitsui Financial Group Inc)
Qi Gao (Bank of Nova Scotia Asia Ltd/Singapore)

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