HALISTER1: INSIDE ASIA: Yen Extends Gains on Brexit Concerns; NZD Slides

INSIDE ASIA: Yen Extends Gains on Brexit Concerns; NZD Slides

(Bloomberg) -- Most Asian currencies steady ahead of FOMC meeting, though yen climbs for third day as U.K.’s vote on Brexit approaches; New Zealand dollar stands out, falling as much as 0.55%.
  • Japanese, Aussie and Kiwi yields plumb new lows as risk aversion persists
  • General risk-off tone will linger heading into FOMC, ANZ FX strategist Khoon Goh says; Asia currencies still more likely to be swayed by uncertainty over U.K. referendum on June 23 than FOMC, with rate Fed widely expected to hold
    • Singapore dollar appears to be trading like a safe haven currency, gaining amid risk-off tone
  • NZD/USD selling led by leveraged investors ahead of sell stop-losses that will trigger on break of 0.7020, Asia-based FX trader says
    • NZD 10-yr interest-rate swap slides 7 bps to 2.7525% after touching 2.7524%, record low on data going back to 1996
  • Yen extends gain, rising as high as 105.94 vs dollar
    • Rally may continue ahead of Fed and BOJ meetings on haven demand stemming from Brexit risk, Ueda Harlow analyst Naoto Ono writes in note today
    • Fitch cuts Japan’s outlook to negative, affirms A rating; less confident in govt commitment to fiscal consolidation after delay to sales-tax increase
    • Kyodo News poll shows 62% of respondents don’t think economy will improve under Abenomics
    • USD/JPY option traders vulnerable to BOJ surprise: analysis
  • Yuan weakens, with Bloomberg synthetic RMB index at new 20- month low; onshore yuan edges down 0.04% vs dollar, while offshore yuan is steady
    • Risk aversion to keep dollar strong in short-term and push USD/CNY upward, but not beyond 6.65 by yr-end, NAB’s Asia head of markets strategy Christy Tan says
    • Most May economic data point to stabilization in China, UBS head of China economic research Wang Tao says in note yday
    • Fidelity buys more onshore Chinese debt on lower yuan volatility
    • MSCI to make call on A-share market early Wed HK-time
  • Aussie bonds rally; Australia May business confidence index falls 2 pts m/m to 3; AUD/NZD may extend rebound on bullish momentum signals: Charts
    • Ex-UBS trader’s hedge fund bets on 10% Aussie rally versus kiwi
  • Won set to advance for first time in three days; KRW expected to be worst performing EM currency due to factors including trade linkages with China, low yield and persistent market expectations of BOK easing, Societe Generale writes in note yday
    • South Korea plans to allow non-financial cos. to conduct FX transactions, Finance Ministry says
  • Baht builds on yday’s gains even with Asian stock markets poised to extend losses; Brexit wouldn’t have significant direct impact on Thai financial markets, says Pakorn Peetathawatchai, senior executive vice president of Thai exchange
    • Baht may weaken to 36.00 per dollar at end-2Q and 37.00 by yr-end as Fed interest rate increase later in yr will probably encourage outflows, Maybank Kim Eng said in note received yday
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Khoon Goh (Australia & New Zealand Banking Group Ltd)
Naoto Ono (Ueda Harlow Ltd)
Tao Wang (UBS Asset Management Japan Ltd)

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