HALISTER1: INSIDE ASIA: Oceania Currencies Slide on Rate Cut Speculation

INSIDE ASIA: Oceania Currencies Slide on Rate Cut Speculation

(Bloomberg) -- Both Aussie and Kiwi slide more than 1% on increasing speculations that their central banks may cut policy rates as early as next month after RBA releases minutes from its July meeting and RBNZ unveils property measures. Most Asian currencies fall in line.
  • Australia govt. 10-year bond yield drops 7 bps to 1.926%, while same tenor bond in New Zealand slides 6 bps to 2.286%
  • Kiwi slides over 1% after RBNZ said it will tighten rules nationwide for property investors in Sept., earlier than that suggested two weeks ago by RBNZ’s Spencer, who said such curbs might come by year-end
    • OIS probability of a rate cut at next RBNZ meeting rises to 78%; was at 72% yesterday
    • NZD fell on RBNZ’s earlier than expected move; growing bias for RBNZ to cut rate August meeting by 25 bps, says Christopher Wong, senior FX analyst at Maybank
    • Tight timeline proposed reinforces likelihood of RBNZ cutting in August especially following softer N.Z. 2Q inflation, said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia
    • RBNZ Bulletin says macroprudential actions may be justified
  • Aussie extends decline after RBA minutes fuels expectation the central bank may cut policy rate next month
    • RBA looks to inflation, labor, housing data to assess outlook, it said in minutes of July meeting
    • Minutes also says inflation expected to remain quite low for some time given very subdued growth in labor costs and very low cost pressures elsewhere in the world
    • AUD/USD to decline toward 72 at end-Sept if there is an RBA rate cut next month, Sue Trinh, head of Asia FX strategy at RBC Capital Markets
    • Further information that RBA awaits will clearly be dominated by next week’s inflation data, says Westpac’s global head of FX and commodity strategy, Robert Rennie
    • AUD/USD may fall to catch up with narrowing 10-yr Australia and U.S. bond yield spread: Charts
  • Peso, ringgit, won as well as Singapore and Taiwan dollars decline, on cue from AUD and NZD
    • Foreign investment in Indonesia and Thailand stocks may fall after heavy buying YTD led to outperformance, CS note says
    • Weakening Asian currencies could be also driven by geopolitical concerns tied to North Korea missile test, says Moh Siong Sim, FX strategist at Bank of Singapore
  • Yuan recovers from beyond 6.7000 after PBOC sets reference rate at 6.6971, stronger than previous day
    • If PBOC shows little intention to defend yuan at 6.7 vs USD, it could fall to 6.8 in weeks: Commerzbank
    • CNY will continue depreciating this year, but at a slower pace, according to a Bloomberg survey of analysts and traders;
    • Yuan has demonstrated a clear trend of depreciation, but the downturn is very gradual and controlled to suppress aggressive speculation: Credit Suisse
  • Yen gains after declining 1.21% yesterday
    • Meiji Yasuda Life Insurance may buy U.S. bonds without currency hedges should the yen rise near 100 per dollar, the strong end of its forecast range for the fiscal year
    • Daiwa SB Investments says it is switching some of its yen cash holdings into Indonesian rupiah and Brazilian real-denominated bonds issued by AAA-rated organizations
  • Won drops for a second session
    • BOK Governor Lee says for small open economies, monetary policy should pay attention to financial stability, as excessive easing could trigger capital outflows or lead to currency depreciation
    • June PPI -2.7% y/y, smallest decline since Dec. 2014, vs revised -3.0% for May
    • China’s 2Q gross GDP and June data sustained risk-on sentiment globally, which favors KRW among Asia FX: ING
    • Limited room to ease space and elevated current-account surplus should continue to support won, CBA wrote in note yday
  • Ringgit falls for second day as WTI crude oil drops and dollar index gains
    • Morgan Stanley suggests selling SGD/MYR 1-mo. NDF with a target of 2.83 and stop at 2.98 because MYR valuations are cheap after significant adjustment last year, according to note yday
  • Rupiah continues its consolidation just above psychological 13,000 level
    • BI is likely to leave its key policy rates unchanged this week though watch its tone, as risks for further rate cuts remain, DBS wrote in a client note dated July 18
  • Peso drops, heading for its first fall in five days ahead of balance of payments data
    • June balance of payments data due today; no est., last +$241m
    • Philippine economy well-placed to grow strongly in short term as consumption is supported by rapid wage growth and healthy household finances, Capital Economics writes in note received today
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Christopher Wong (Malayan Banking Bhd)
Elias Haddad (Commonwealth Bank of Australia)
Moh Sim (ING Groep NV)
Robert Rennie (Westpac Banking Corp)
Sue Trinh (Royal Bank of Canada)

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