HALISTER1: INSIDE ASIA: Most EM Currencies Drop as USD Stabilizes; RBA Due

INSIDE ASIA: Most EM Currencies Drop as USD Stabilizes; RBA Due

(Bloomberg) -- Most Asian EM currencies weaken as the Bloomberg Dollar Index stabilizes after a U.S. public holiday yesterday. Aussie set for longest stretch of advance since March before RBA rate decision today.
  • Markets are pricing in Fed rate hike this year, regardless of whether it will be in Sept. or Dec. and this is providing underlying support for the dollar, says Kyosuke Suzuki, head of FX and money market sales at Societe Generale
    • Fed will boost rates in Dec. when political risks are fading; if it refrains from raising rates in Sept., the market will see risk-on sentiment with investors selectively searching for higher yields in EM
  • Aussie extends gain following a narrower-than-est. current account deficit; 2Q shortfall at A$15.5b vs est. A$20b deficit
    • Aussie gains on current account data, but pauses at option strike: trader
    • 2Q net exports -0.2% pt of GDP vs est. flat; net exports data is a key component of 2Q GDP due Wednesday
    • RBA is likely to keep policy rate unchanged today at 1.50%, according to economists surveyed by Bloomberg
    • A series of AUD/USD triple tops near 0.7750 may be revisited by end-Sept if 3Q GDP beats estimates and new RBA governor Philip Lowe fails to jawbone Aussie lower in response: analysis
  • Kiwi advances for fifth day ahead of milk auction later
    • New Zealand house-price inflation accelerates for a fifth month in Aug.
  • Yuan slips even as China strengthens fixing by most since Aug. 17
    • USD/CNH spiked higher on broad-based buying coinciding with end of China’s G-20 meeting, with large Chinese banks selling into the move, according to FX traders in North Asia
    • Sudden spike in USD/CNY, USD/CNH earlier suggests Chinese central bank may be starting to loosen some control over the yuan mkts now that G-20 meeting is over, Iris Pang, senior economist of Greater China at Natixis says
    • China is studying expanding use of Special Drawing Rights to facilitate SDR-denominated financial products, PBOC deputy governor Yi Gang says
    • Investors likely to keep testing 6.7000 level for one or two more days as Fed speeches scheduled this week may be hawkish, says Ryan Lam, head of research at Shanghai Commercial Bank
    • China faces pressure to further cut RRR this yr, Nomura says
  • Yen pares losses after PM Abe’s adviser Hamada says BOJ should wait for Fed before acting
    • Hamada’s comments eases speculation of further monetary easing by BOJ in Sept., Shinichi Takasaka, chief manager for forex and financial products trading at Mitsubishi UFJ Trust and Banking says
    • USD/JPY consolidating in 103-104 range for now: Societe Generale
    • 30-year govt bonds set to snap 9-day drop
    • Auction of 30-year bonds drew stronger demand, with cut- off price surpassing est. and bid-to-cover ratio rising from previous offering
    • Sovereign 30-year yields are rising at a pace that suggests an outcome that could mirror the carnage of 2013
  • Ringgit declines ahead of BNM rate decision this week
    • Speculation of rate cuts by BNM intensifying, with fixed income market pricing in a rate cut within next 6 mos., DBS Bank analysts including Eugene Leow, fixed income strategist write in note today
  • Peso weakens
    • There appears to be no strong need to change monetary policy stance, BSP Governor Tetangco says
    • Consumer prices increased 1.8% y/y in Aug. vs est. +2.0%
    • Govt has set its budget deficit target for next yr at 478b pesos ($10.3b) before widening to 777b pesos in 2022, Budget Secretary Diokno says; optimistic tax reforms in place as early as year-end
  • Taiwan dollar appreciates for a third day
    • Aug. consumer prices rose 0.57% y/y vs est. 1% gain
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
40005Z AU (Reserve Bank of Australia)

People
Eugene Leow (DBS Group Holdings Ltd)
Iris Pang (Natixis SA)
Kyosuke Suzuki (Societe Generale SA)
Philip Lowe (Reserve Bank of Australia)
Ryan Lam (Shanghai Commercial & Savings Bank Ltd/The)

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