HALISTER1: INSIDE ASIA: Currencies Gain After FOMC; BI, BSP Decisions Due

INSIDE ASIA: Currencies Gain After FOMC; BI, BSP Decisions Due

(Bloomberg) -- Most Asian currencies advance, led by won and ringgit, after FOMC damped outlook for higher U.S. interest rates. New Zealand dollar declines as RBNZ signaled further easing after leaving rates unchanged.
  • “Asia FX and bond markets are taking comfort from Fed’s policy meeting,” Stephen Chang, head of Asian Fixed Income at JPMorgan Asset Management says in interview. “We expect the path of higher Fed interest rates to be quite shallow and this means the demand for Asian bonds are likely to remain strong”
  • Regional bonds rise as Fed’s dot plot shows it expects one 25-bps rate increase this year, followed by two in 2017; whereas in Jan., it showed four hikes for 2016 followed by another four in 2017
    • Australia’s 10-year yield drops 7 bps to 2.062%, New Zealand’s 10-year yield slips 11 bps to 2.505%; yield on China’s 2.74% govt bond due Aug. 2026 falls 1 bp to 2.750%
  • Rupiah strengthens to touch strongest in almost two weeks ahead of Bank Indonesia’s decision
    • BI may lower its policy rate by 25 bps to 5.00% today, according to 16 of 19 economists surveyed by Bloomberg; rest see no change
    • ING predicts a 25bps cut to 5% today and one more cut to 4.75% in 4Q as well as cumulative 50-bps reductions in 2017, according to note yday
  • Peso advances for first time in six days ahead of Bangko Sentral ng Pilipinas’s decision
    • Philippines central bank seen holding overnight borrowing rate at 3.00% by all 16 economists in Bloomberg survey; decision due at 4:00pm local time
  • Australian dollar advances for a fourth day as Bloomberg Commodity Index extends gains
    • Inflation is expected to remain low for some time, but then to gradually pick up as labor market conditions strengthen further, RBA governor Philip Lowe comments to parliamentary committee; expects economy to continue to be supported by low rates and depreciation of exchange rate since early 2013
    • Australia ‘not at all’ running out of policy options, RBA’s Lowe says
  • New Zealand dollar drops for first time in four days
    • RBNZ says further monetary easing will be needed even as nation’s economy grows; click here for RBNZ statement and here for roundup
    • AUD/NZD has risen to near 1.0400 after today’s RBNZ meeting, but relative terms of trade trend between Australia and New Zealand suggest relief rallies in AUD/NZD will be limited, CBA writes in note today
  • Won gains, outperforming regional peers
    • Economic data including exports, sentiment, and employment improved somewhat in Aug. but pace of recovery isn’t steady: Finance Minister Yoo said yday
    • Finance Ministry says it will closely monitor impact on financial markets of FOMC’s decision and progress of North Korea’s nuclear weapons program, and will respond to prevent excessive volatility in FX market
    • USD/KRW could fall to as low as 1,070 per dollar by next week, though beyond that level vigilance over govt intervention could heighten, Ha Keon Hyeong, economist at Shinhan Investment Corp in Seoul, says
  • Taiwan dollar strengthens, touching highest since July 2015
    • Island’s Aug. jobless rate stood at 3.95% vs median est. 3.99%; prior 3.96%
    • Aug. export orders due at 4:00pm local time; est. 0.5%, prior -3.4%
  • Ringgit rises for a second day
    • Malaysia ensuring fiscal prudence theme of 2017 Budget means no big election giveaways, UOB wrote in note yday; expects fiscal deficit of 3.1% of GDP in 2017, vs est. -3.1% in 2016
  • Yen swings between gains and losses
    • BOJ, FSA and MOF to hold meeting at 2pm local time today, which is a public holiday in Japan
    • AUD/JPY bid by Japanese banks as RBA Lowe speaks: trader
    • BOJ should have made its latest changes contingent on govt adopting more economic reforms: Mohamed A. El-Erian
  • Yuan declines in both offshore and onshore markets
    • Yuan depreciation would still resume towards year-end given Dec. hike more likely, Natixis Greater China senior economist Iris Pang says
    • PBOC official says yuan to be international finance currency, Shanghai Securities News reports
    • Central bank pushes yuan clearing services along belt and road, China Daily reports, citing Deputy Governor Chen Yulu
    • China allows Arab Monetary Fund to enter onshore FX market, according to a statement on Chinamoney.com.cn yesterday
    • PBOC said to plan direct yuan trading with dirham, riyal
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Chen Yulu (People's Bank Of China)
Iris Pang (Natixis SA)
Keon-Hyeong Ha (Shinhan Investment Corp)
Philip Lowe (Reserve Bank of Australia)

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