HALISTER1: INSIDE ASIA: Currencies Rally; BOK Springs Surprise Rate Cut

INSIDE ASIA: Currencies Rally; BOK Springs Surprise Rate Cut

(Bloomberg) -- Asian currencies rally on continued dollar weakness; Bank of Korea unexpectedly cuts interest rate; Reserve Bank of New Zealand maintains monetary policy.
  • Markets in China and Hong Kong closed for public holiday
  • Dollar weakness continues on expectations Fed will hold off rate hikes until later this year, FPG Securities CEO Koji Fukaya says; although direction for Fed remains toward rate increase, dollar may stay sluggish for time being
  • Dollar Index declines for fifth day; probability of Fed rate hike on June 15 is 0% vs 22% a week ago; July hike 18% vs 54.8% on June 2
    • Brent crude gains for fourth day; MSCI Asia Pacific Index declines, set to snap four-day rally
  • South Korea’s won moves higher after sharp drop post rate cut; now in line for fifth straight day of gains; rate cut forecast correctly by only one of 18 economists in Bloomberg survey; rest expected BOK to hold; interest-rate swaps fall
    • More rate cuts possible in coming months, says Krystal Tan, Asia economist at Capital Economics; concerns about downside risks posed by corporate restructuring were likely a factor in BOK’s decision; Korean economy is fragile and could use some support
    • Rate cut may spur expectations that export-driven Asian nations will seek weaker currencies, according to BBH
  • New Zealand dollar rallies for third day
    • RBNZ maintains benchmark interest rate at 2.25%; analysts say RBNZ statement is slightly more upbeat and hints of small chance of just one more rate cut this year; research roundup here
    • RBNZ Governor Wheeler says RBNZ looking at measures to curb property investors
  • Yen heads for three-day rally; BOJ Deputy Governor Nakaso says BOJ monitoring liquidity, functioning of JGB market; will ease if necessary to hit 2% price target; NOTE: Biggest Bank Quitting Japan Bond Club Shows BOJ Crushing Market
    • Japan’s nine biggest life insurers increased hedges against dollar declines in fiscal half yr-ended March 31 even as costs of doing so climbed, according to latest earnings reports
    • April core machine orders fell 11% m/m vs est. -3%, +5.5% in March; decline in April factory orders suggests weak outlook on capital spending as corporate earnings slow, Credit Agricole says
    • Japanese bought net 893.9b yen overseas debt last week; NOTE: Japanese Buy Overseas Bonds as Wells Fargo Says Asia Bulls Rule
  • Offshore yuan steady with China and HK markets closed
    • May CPI +2.0% y/y vs est. +2.2%; PPI falls 2.8% y/y in May vs est. -3.2%; NOTE: China’s Factory-Gate Deflation Eases in Capacity-Cut Drive
  • Baht heading for eighth day of gains; Thai consumer confidence data for May due 10:30am local time; sentiment index slipped to 7-month low in April
    • Thailand has negative output gap, falling consumer prices, downside risks that “warrant additional monetary accommodation,” IMF said yday
  • Rupiah extends rally to sixth day, heading for longest rising stretch since period ending March 7
  • Philippine peso rises for seventh day, hits highest vs dollar in nearly eight months; growth in 2Q probably accelerated, Budget Secretary Abad says, according to Manila Bulletin
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
1206Z KS (Bank of Korea/The)

People
Koji Fukaya (FPG Securities Co Ltd)
Krystal Tan (Capital Economics Asia Pte Ltd)

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