HALISTER1: INSIDE ASIA: Currencies Drop as Oil, U.S. Election Spur Caution

INSIDE ASIA: Currencies Drop as Oil, U.S. Election Spur Caution

(Bloomberg) -- Most Asian currencies decline as Friday’s oil price plunge and increasing focus on the U.S. presidential election raise risk-aversion sentiments. Yen gains.
  • Ringgit falls 0.5% amid conflicting signals over upcoming OPEC meeting, while the peso drops to a 2009 low over continuing concerns over President Duterte’s policies
  • Investor sentiment remains poor toward Philippine assets with foreign-equity outflows, Khoon Goh, head of Asia research at ANZ says
    • With the BOJ and Fed meetings out of the way, focus now turns to the U.S. presidential election
  • Bond yields drop in Asia. Australia 10-year govt. bond yield falls 3 bps to 1.972%, yield on China 2.74% govt bond slips 2 bps to 2.725%; Japan 10-year govt. bond yield dips 1 bps to -0.055%
  • Yen gains ahead of BOJ Governor Kuroda’s speech
  • Sakakibara, known as Mr. Yen when he was MOF official, says BOJ hasn’t lost control of the the exchange rate and that its new yield curve strategy is appropriate
    • BOJ says it held 36% of JGBs at end June, foreign investors held 10% of JGBs
    • Tokai Tokyo Securities expects BOJ to be less resistant to curve flattening and yield declines because they amount to monetary easing, according to note today; says steepening of yield curve is equivalent to monetary tightening
  • Kiwi and Aussie extend declines
    • New Zealand trade gap widens as exports at three-year low, according to data today
    • Fonterra says today August N.Z. milk collection falls 5% from year ago
    • Further slowdown in NZ’s 1-year-ahead inflation expectations will raise odds of more aggressive RBNZ easing and undermine NZD, CBA writes in note today
  • Yuan little changed onshore ahead of currency’s inclusion in IMF’s SDR on Oct. 1 and China’s National Day holidays on Oct. 1-7. CNH drops
    • Markets have reached consensus that both CNY and CNH are likely to be managed tightly ahead of SDR inclusion, Tommy Xie, economist at OCBC, writes in note today
    • PBOC pulled a net 245b yuan from the financial system through reverse-repurchase agreements, biggest one-day withdrawal since March 4
  • Won drops for first day in four
  • BOK will release minutes of meeting tomorrow
    • Bank of Korea is likely to maintain a dovish stance for now: Marc Chandler, head of currency strategy at BBH,
  • Ringgit drops for second day
    • Oil is likely to weigh on the MYR and result in a consolidation in USD/MYR ahead of the 15th International Energy Forum set for 26-28 September, writes Scotiabank in note today
    • Oil tumbled Friday after Saudi Arabia suggested that the Algiers meeting this week is unlikely to reach a firm decision. Algeria’s energy minister then said Saudi Arabia has offered to cut production
  • Peso drops, weakest since Sept. 2009, as S&P tells ABS-CBN News Channel that Philippine ratings at risk if reform commitment stalls
    • Govt to file 291b pesos tax reform package today, Manila Bulletin said Friday
  • Rupiah steady
    • Goldman expects additional 25-bps rate cut in 4Q with risk of even more reductions, a change from previous forecast of no further cuts for the year, according to Sept. 23 note
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Khoon Goh (Australia & New Zealand Banking Group Ltd)
Tommy Xie (Oversea-Chinese Banking Corp Ltd)

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