HALISTER1: INSIDE ASIA: Aussie Jumps on RBA; China PMI Surpasses Estimates

INSIDE ASIA: Aussie Jumps on RBA; China PMI Surpasses Estimates

(Bloomberg) -- Aussie surges after RBA held rates, while most Asian currencies strengthen after China’s factory gauge jumps to a two-year high.
  • Aussie advances as much as 0.8% as RBA kept its cash rate at 1.5%. Central bank also flags brisk gains in some housing markets and its reading of a steadier outlook for top trading partner China
  • China’s October PMI came in at 51.2, beating the 50.3 estimate. Other indicators including non-manufacturing PMI and Caixin manufacturing were also better
  • The PMI data helped Asian currencies though overall sentiment still isn’t great, says Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie. Market uncertainty is being elevated ahead of upcoming key U.S. data and event risks
  • Yen weakens after BOJ says it will maintain its monthly bond purchases for super-long-term debt, dampening some expectations that it will start to taper
    • USD/JPY rises as much as 0.3% to 105.10 after the November debt-purchase plan was announced. It was earlier unchanged when BOJ said it won’t add stimulus at its policy decision
    • BOJ shifts reaching CPI target of 2% toward second half of period running through March 2019, trims inflation forecasts for FY2016 to FY2018, and says “risks to economic activity and prices are skewed to the downside.”
  • Sovereign bonds slide in Australia, Korea and Malaysia, while gaining in China
  • Aussie gains for third day, with leveraged accounts reloading long AUD/USD positions, according to an Asia-based FX trader
    • Central bank will leave policy on hold for the foreseeable future, according to economists
    • RBA’s updated language on China, “brisk” rises in house prices, and macro outlook is another step in a series of incrementally less dovish communication: Goldman
    • AUD/JPY could retreat to 78.074 level near term as pair fails to breach 200-DMA resistance: Analysis
  • Onshore yuan heads for first 2-day gain vs dollar in 6 weeks while offshore yuan falls
  • PMI shows economic recovery is well supported, which will give PBOC room to curb a property bubble and tighten liquidity in the “money markets,” says Macquarie Securities head of China economics Larry Hu
    • Still, export orders had dropped, and PBOC may keep a weak yuan bias to counter soft global demand, says Natixis
    • Strong PMI reading supportive of Asian regional trading partner currencies, particularly AUD, KRW and TWD, says RBS
  • Won strengthens as much as 0.5% vs dollar
    • BOK board called for caution on household debt, according to minutes of Oct. 13 rate decision released today
    • Household debt is a key reason why BOK is freezing interest rates, Stephen Lee, economist at Samsung Securities says; focus will turn to govt’s announcement on Thursday of another round of measures related to household debt
    • Prosecutors detain Choi Soon-sil, a friend of President Park at the heart of an influence-peddling scandal; the scandal while a blow for Park, isn’t for the economy: Capital Economics
    • CPI +1.3% y/y in October, highest since February, vs est. +1.1%. Exports met estimates, while imports -5.4% vs -4.4% est.
  • Ringgit swings to a gain after China data
    • Malaysia likely to report weaker trade number this week, which will maintain pressure on MYR, CIMB writes in note; trade data due Nov. 4
  • Rupiah advances for a second day
    • Indonesia CPI +3.31% y/y in October, highest in 4 months
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Larry Hu (MacQuarie Securities Ltd)
Nizam Idris (Macquarie Group Ltd)
Stephen Lee (Samsung Securities Co Ltd)

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