HALISTER1: INSIDE ASIA: Currencies Gain as Brexit Risk Recedes; Yen Drops

INSIDE ASIA: Currencies Gain as Brexit Risk Recedes; Yen Drops

(Bloomberg) -- Most Asian currencies gained as the murder of a U.K. lawmaker fueled speculation Britons will be less inclined to vote to leave the EU. Sovereign bonds fell.
  • The yen is headed for its first decline in six days as demand for haven assets dipped and Finance Chief Aso said the government is monitoring markets with a “sense of urgency.”
    • Aso says he’ll like to take firm action, when needed, in line with G-7 and G-20 agreements
    • With both Fed and BOJ leaving monetary policy on hold, USD/JPY may drop further ahead of Brexit vote on June 23, says Takahiro Sekido, Tokyo-based Japan strategist at Bank of Tokyo-Mitsubishi UFJ.
  • Central banks in Japan, the U.S. and Europe are discussing an emergency addition of dollars to ensure liquidity should the pound plunge in response to Brexit, the Nikkei reports, without attribution
  • Bonds fall in Asia, with Australia’s benchmark 10-year yield up 8 bps to 2.081%; similar-maturity yield in Japan adds 1 bp to -0.190%, while Singapore’s yield rises 7 bps to 2.07%
  • Market uncertainty remains, esp since Bank of Indonesia’s cutting of interest rate yesterday could be followed by other central banks including Taiwan and Malaysia, says Masashi Murata, currency strategist at Brown Brothers Harriman
  • Rupiah climbs; BI unexpectedly cut reference rate to 6.5% from 6.75%, 7-day reverse repo rate, new benchmark in Aug., also cut to 5.25% from 5.5%
    • BI said GDP was main focus in policy meeting; sees 2Q GDP growth at 4.9%-5% y/y
    • Economists are divided over whether BI will cut further
  • Aussie rises, buying led by macro funds covering yesterday’s shorts, according to an Asia-based FX trader, while NZD is headed for a third day of gains as PMI accelerates for a second month
    • NZ’s manufacturing index rose to 57.1 in May, from 56.6 in April: Bank of New Zealand and Business New Zealand
    • NZ Job ads & confidence gauge gain
    • Next Tuesday’s minutes of the RBA’s June meeting could weigh on AUD as the central bank provides more insight on its easing bias and concerns about falling inflation: BNP Paribas note
  • Yuan rises with most other Asian currencies amid a weaker dollar; Chinese government bonds climb the most since January this week
    • Before Brexit referendum, USD/CNH will probably trade below 6.61, says Fiona Lim, senior FX analyst at Maybank; could see retracement for USD/Asian currencies if UK votes to stay
    • Bloomberg synthetic CFETS index declines 0.15% to 95.8146, lowest since Oct 31, 2014
  • Won falls; govt will seek active role for fiscal policy in 2H as exports are sluggish and domestic demand is slowing, says Finance Minister Yoo
  • Southeast Asian currencies mostly firmer
  • Baht is set to snap two weeks of advance; public debt rose by 36.9b baht ($1.05b) to 6.05t baht in April, finance ministry said yesterday
    • Weekly foreign reserves data through June 10 due at 2:30pm local time; $178.0b a week earlier
  • Ringgit up; USD/MYR appears to be stabilizing around 4.10 after gapping up to recent high of 4.17 earlier this month, UOB wrote in note yday
  • Singapore non-oil domestic exports rose 11.6% y/y in May, most since March 2015, vs est. 1.6% decline
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Fiona Lim (Malayan Banking Bhd)
Masashi Murata (Brown Brothers Harriman & Co)
Takahiro Sekido (Bank of Tokyo-Mitsubishi UFJ Ltd/The)

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