HALISTER1: INSIDE ASIA: Yen Drops on Japan Stimulus Optimism; Aussie Surges

INSIDE ASIA: Yen Drops on Japan Stimulus Optimism; Aussie Surges

(Bloomberg) -- Yen falls for a second day on expectations that Prime Minister Abe will unveil a stimulus plan following the election win, helping to bolster risk sentiment.
  • Investors are anticipating “mega stimulus” in Japan, which is pushing USD/JPY higher, says Stephen Innes, senior trader at Oanda; until Japan’s govt has tabled reforms, higher USD/JPY will give speculators better levels to buy yen
    • Abe hasn’t yet ordered a stimulus package, says Economy Minister Ishihara
    • If PM Abe reveals details on economic stimulus, USD/JPY may rise further toward 103.39, says Naoto Ono, analyst at Ueda Harlow
    • USD/JPY buying in earlier hours led by leveraged investors, according to an FX trader in Asia
  • Yen dips 0.3% to 103.10, following a 2.3% decline yesterday, while the Aussie surges 0.6%. Asian markets are mixed with the yuan rising after Chinese banks were seen selling USD in offshore markets
  • Japan 10-year sovereign bond yield up 1 bp to -0.259% while same tenor govt. bond yield in Australia jumps 5 bps to 1.952%; U.S. 10-year Treasury yield up 1 bp to 1.439%
  • Aussie rises; Australia June business confidence gains 3 pts m/m to 6
    • AUD top forecaster says relatively high interest rates could turn out to be its weakness in coming months; RBA’s ability to cut rates more than others will cap currency
  • Yuan gains
    • USD/CNH sold by large Chinese banks in North Asia, according to FX traders in the region
    • PBOC may have intervened in the FX market today after “unusually high” onshore yuan trading volume yday signaled rising demand for dollar, OCBC Bank economist Tommy Xie says
    • There’s a USD squeeze onshore, says onshore traders
    • Brexit knocks yuan forecasts to 7 and beyond; BofA sees yuan at 7 by yr-end; UBS expects 7.2 sometime next year; Goldman, RBS and ABN Amro Bank NV forecast 7 in 2017
  • Won pares losses after it fell as much as 0.48% earlier
    • BOK is expected to trim 2016 GDP growth forecast to 2.6% from 2.8%, and lower CPI inflation prediction to 1.0% from 1.2%, Nomura wrote in note yday
  • Currencies in Southeast Asian drop
    • Peso hits four-month low after exports missed forecast, with shipments falling 3.8% y/y in May, median est. was -2.4%
    • President Duterte isn’t planning unmitigated spending, according to Finance Secretary Dominguez
    • Ringgit dips after touching 2-month high yesterday. Malaysia industrial production due today; ests. +2.5% y/y vs +3.0% in April, according to median est. in Bloomberg survey
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Stephen Innes (OANDA Corp)
Naoto Ono (Ueda Harlow Ltd)
Tommy Xie (Oversea-Chinese Banking Corp Ltd)

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