HALISTER1: INSIDE ASIA: EMFX Fall as Global Yields Up; Won Slip on N.Korea

INSIDE ASIA: EMFX Fall as Global Yields Up; Won Slip on N.Korea

(Bloomberg) -- Asian EM currencies weaken as global bond yields jump overnight after ECB fails to signal more easing ahead. South Korea’s won leads losses, sliding as much as 1% after North Korea conducts a nuclear test.
  • Some traders and investors think the recent sell-off in USD may have been excessive, triggering a correction today, Shigeki Yoshitoshi, head of Japan FX and Commodities sales at ANZ, says
  • Regional bonds followed a decline in global debt markets after ECB downplayed the need for additional stimulus
    • Australia’s 10-year yield climbs 8 bps to 1.949% while rate on similar maturity debt in Japan increases 1.5 bps to -0.025%; yield on China’s 10-year notes steady at 2.8000%
  • Won slides as much as 1% after South Korea detects artificial earthquake in North Korea and S.Korean officials say the North conducted its fifth and biggest ever nuclear test today
    • South Korea foreign ministry holds emergency meeting: Yonhap
  • Japan Chief Cabinet Secretary Suga says his country will consider further sanctions against North Korea
    • BOK kept interest rate at 1.25% as forecast; domestic demand continued to improve, while economic sentiment lifted somewhat, central bank says in statements after the decision
  • Onshore and offshore yuan decline for a second day as China sets reference rate weaker against dollar; offshore yuan liquidity remains tight though easier from yday
    • PBOC advisor Fan says yuan should weaken like other currencies
    • Sudden spike in USD/CNY triggered broad-based dollar buying versus offshore yuan, according to FX traders in North Asia
    • Selloff in onshore yuan after opening may be related to easing concerns over CNH liquidity, Ken Cheung, Asian FX strategist at Mizuho Bank says
    • Rising short-term CNH rates may be partly related to expiration of previous FX operations, Frances Cheung, head of rates strategy, Asia ex-Japan at Societe Generale in Hong Kong, writes in note
  • China Aug. consumer prices rose 1.3% y/y vs est. +1.7%
    • Bond yields may face downward pressure on knee-jerk reaction to latest CPI reading which is well below estimates, David Qu, Shanghai-based markets economist at ANZ says
    • China says yuan/dollar rate flexibility increases
    • If China’s GDP was calculated based on SAFE trade data instead of customs trade data, GDP lvl would be much smaller, Sue Trinh, head of Asia FX strategy at RBC Capital Markets writes in a note today
  • Yen set for biggest weekly gain since week ended July 29
    • BOJ Governor Kuroda meets with PM Abe; will speak to press after 1pm local time: Nikkei
    • USD/JPY pressured lower as macro funds sold spot from 102.40, according to an Asia-based FX trader
    • Higher expectations for a Fed rate hike and a BOJ easing are required for USD/JPY to be bought substantially, says Yasuhiro Kaizaki, NY-based vice president for global markets at Sumitomo Mitsui Trust Bank; test of 103 depends on Fed officials’ speeches today and next Monday as well as on UST yields
    • Japanese lifers demand driving offshore bond flow, life insurance companies accounted for 75% of August offshore bond flow, buying more than 1t yen for 3 consecutive months: TD
  • Aussie and kiwi little changed, both set for 2nd weekly gains
    • Australia July home-loan approvals declined 4.2% m/m against est. 1.5% slide
    • New Zealand retail card spending unexpectedly declined in Aug., falling 0.4% m/m vs est. 0.3% gain
  • Peso drops for fourth day
    • Philippine exports decreased 13% y/y in July, more than est. -10.0%
  • Ringgit set to snap two-day advance
    • Malaysia’s industrial production probably increased 4.5% y/y in July following 5.3% gain prior month, according to Bloomberg survey before data today
  • Rupiah set to snap five-day rally
    • BI to ease further in Sept. or Oct. if data supports, Governor Martowardojo says
    • BI sees 2017 budget deficit at around 2.5% of GDP
    • Indonesia President Widodo meets Philippine President Rodrigo Duterte in Jakarta
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Frances Cheung (Societe Generale SA)
Joko Widodo (Republic of Indonesia)
Ken Cheung (Mizuho Financial Group Inc)
Shigeki Yoshitoshi (Australia & New Zealand Banking Group Ltd)
Yasuhiro Kaizaki (Sumitomo Mitsui Trust Holdings Inc)

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