HALISTER1: INSIDE ASIA: Won Leads Decline as Fed Speeches Spur Hike Talk

INSIDE ASIA: Won Leads Decline as Fed Speeches Spur Hike Talk

(Bloomberg) -- The won leads a broad drop in currencies in Asia Pacific after comments by Fed speakers last Friday raised the possibility of a September rate hike, spurring dollar gains.
  • Most Asian currencies are reacting to a stronger dollar as Fed Chair Yellen adopted a more hawkish tone than expected, says Iris Pang, a senior economist of Greater China at Natixis
  • 2-yr Treasury yields may extend post-Jackson Hole gains toward three month highs, see here for chart
  • Markets imply 42.0% probability of Fed rate hike in September, and 65% in December. Had projected a 32% chance for an increase next month before Fed speeches at Jackson Hole
  • There is now a growing chance for a Fed rate increase in September, with pressure on short-term UST yields to rise, Hideo Shimomura, chief fund investor at Mitsubishi UFJ Kokusai Asset Management, says in interview
    • Bank of Japan may also deliver easing earlier than expected, and the JGB yield curve will probably steepen
  • Yen falls to lowest in two weeks against dollar
    • BOJ Governor Kuroda said over the weekend at Jackson Hole that BOJ will act decisively. Adds “zero lower bound is no longer insurmountable” as a policy constraint, and that the current rate is still far from a lower range
  • Buy-the-dip strategy for USD/JPY may work ahead of U.S. nonfarm payrolls data on Friday, says Koichi Takamatsu, head of G10 spot trading for Japan at Nomura Securities
  • China’s reference rate today was stronger than some analysts expected, spurring dollar selling from Asia-based leveraged accounts, according to traders in North Asia
    • PBOC may be seeking to limit a decline in the currency in order to contain volatility ahead of the G-20 Summit, Mizuho Bank Asian FX strategist Ken Cheung says
  • Chinese central bank continues to inject liquidity into the system with 7-day and 14-day reverse repos
  • Korean won falls as much as 1.3%, while sovereign bonds decline across the curve
  • Aussie drops to lowest level in almost a month against dollar, though later pares losses
    • Australia’s new home sales -9.7% m/m in July vs +8.2% in June
  • Southeast Asian currencies decline, except for Thai baht
  • Rupiah snaps two-day gain
  • Bank Indonesia sees CPI -0.04% m/m in last week of Aug.: Kontan
  • Indonesians submitted 103t rupiah ($7.76b) assets to tax amnesty program
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Iris Pang (Natixis SA)
Hideo Shimomura (Mitsubishi UFJ Financial Group Inc)
Ken Cheung (Mizuho Financial Group Inc)

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