Forex - Asia Open - Overnight Highlights
23:38 (GMT) 19 May
[Forex Highlights]
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Asia Overnight Highlights - 20 May 2011
Joanna Tan, Radhika Rao, Connie Tse
ASIA OUTLOOK: US initial claims data and home sales turned out to be better than expected last night and USD long positions were purged. Expect a gap down in regional pairings with the equity bourses finding some support on Wall Street cues. However, we are not entirely convinced that underlying risk aversion has receded resoundingly. As such, a softer start in the USD/Asians will probably give way to some cautious consolidation below. In the Far East, not much significant data to take the stage; BoJ decision not likely to have much impact on markets.
OVERNIGHT NEWS HIGHLIGHTS - US
- Initial claims pull back to 409k from 438k, vs 420k exp.
- May Philly Fed unexpectedly falls to 3.9 from 18.5, vs 20.0 exp.
- Apr existing home sales to 5.05m from 5.09m, vs 5.20m exp.
- Apr leading indicators -0.3% vs +0.1% exp.
- Gold spot: $1493.3/oz -3.8 (-0.25%)
- Reuters/Jefferies Commodities Index: 339.3 +7.73 (+2.3%)
- 10Y UST: 3.171 -0.29% -1bps
- DJI 12605.3 (+0.36%); S&P 1343.6 (+0.22%); Nasdaq 2823.3 (+0.3%)
ASIA
China: Nationwide increase in power prices is unlikely and price adjustment will depend on each province, according to Shu Yinbiao, Vice President of China State Grid Corp.- China Securities Journal
China: Beijing may start a property tax as early as the second half of the year.- China Securities Journal
China: Current pace of yuan settlement development is sustainable and in line with market demand; adding yuan internationalization cannot be rushed and must be in-line with pace of capital account liberalization. China aims to expand cross-border yuan trade settlement trials to the whole nation by end of the year, according to Li Bo, director-general of the monetary policy department at PBOC; trials will be conducted in 20 provinces and cities.
South Korea: Finance ministry announced trimming banks' ceiling for derivative positions by one-fifth. For domestic banks, cap now stand at 40% of equity (vs 50% prev), while ceiling for foreign banks is higher at 200% of equity (vs 250% prev); changes will be effective 1 Jul.
Indonesia: Strong possibility that May CPI will fall, according to Rusman Heriawan, Chairman of Central Bureau of Statistics.
CURRENCIES:
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- EUR/USD managed to bounce back and forth in range from 1.4207 to 1.4306. Even as the eurozone session wound down, prices were at 1.4250, virtually unchanged from Wed's N. American close. The biggest news item seemed to be the ongoing debate about who will take the lead at the IMF. In post eurozone close activity a sudden uptick in equities that sent S&P futures to intraday highs of 1345, jolted EUR/USD and prices rocketed from unchanged through 1.4300 to highs of 1.4320-25 then retraced toward the figure once again.
- USD/JPY's range of 81.51 up to 82.23 represent what might be the most dynamic action in the market. The move up through 82.00 was probably a reflexive response to a minor equity rally after weekly US initial claims came at lower than expected levels of 409k.
- GBP/USD should have been the most interesting currency on the list today. Retail sales were stronger than anticipated at 1.1% m/m, but that did not lead to any extraordinary activity. Like EUR/USD, GBP/USD was nearly unchanged as eurozone traders cleared desks/positions and went home for the ni ght.
BONDS:
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Treasuries slipped modestly in the London trade as Spain successfully tapped reopened 10- and 30-yr Bonos. A sharp slip came after initial claims surprised lower, continuing their downward trek following some recently unexpected upside. The bearish run was stopped in its tracks after the 2nd round of data brought a sharply weaker Philly Fed and softer new home sales and leading indicators. Tsys retraced some losses after the 2nd data round as the long end underperformed. Treasury announced an 8th straight $99bn 2s-5s-7s offering for next week. The 10yr TIPS reopening came in fairly decent, seeing a 2.66 B/C as indirects took 40.7%. Directs got 3.1% and dealers were left with 56.1%. Tsys pushed higher into the close as 30s lagged on upside. 2s -3bp 0.52%, 5s -2bp 1.82%, 10s -1bp 3.17%, 30s +1bp 4.31%.
- Agency Spreads: Freddie/Fannie 2s -0.5/+0.2 bps, 5s +1.6/+1.3 bps, 10s -1.4/+0.1 bps.
- Interest rate swaps: 2s -0.11bps, 5s +0.44bps, 10s +0.82bps.
EQUITIES:
Equities started the day higher as optimism about a certain new IPO prevailed in the face of mixed data. The market was unable to shake off the weight of the weaker data however, slipping ahead of the afternoon. A range trade ensued toward the close, with stocks finishing modestly firmer. The S&P was up 0.22% as the DJIA gained 0.36%.
NORTH ASIA
USD/CNY: Overnight 1Y NDF dealt at 6.3710 and closed at 6.3640/6.3690. 1Y NDF expected to start weak on a soft dollar tone though the mixed set of overnight US data will unlikely drive regional bourses with much conviction. Eye 6.3500-6.4000 range with initial support at 6.3630 ahead of 6. 3575.
USD/KRW: Overnight NDF saw high volume dealt at 1086-1089 range and closed at 1086/1087. Yesterday's announcement of tighter controls on FX derivative limits (effective 1 Jul) to lend support at dips. For spot USD/KRW, initial support seen at 1082.00 ahead of 1080.5. BOK Governor Kim will hold a monthly meeting with heads of major banks this morning.
USD/HKD: Expect a weaker start on soft dollar tone though consolidation later in the day within 7.7700-7.7760 range. Unemployment rate released yesterday showed a rise to 3.5% in Feb-Apr11 from 3.4% prev due to a jump in the labor force.
USD/TWD: Trade expected to be range bound in 28.730-28.851 on lingering eurozone debt woes and CBC intervention. Overnight NDF saw low volume dealt at 28.80 and closed at 28.77/28.80.
SOUTHEAST ASIA
USD/SGD: Euro rally last night led the slippage in the USD/SGD to 1.2360-ish lows. Expect the pair to find range bound moves in the 1.23-1.24 band for now; bearish moves not likely to extend given that risk appetite is no seen to have returned unequivocally.
USD/MYR: Moderate volume cited in the overnight NDFs for the range of 3.0210-3.0280; closed softer at 3.0180-3.0220 after the 3.0270-3.0230 open. The pair is expected to gap down below the 3.02-handle in opening trade but the 3.00-figure still draws the line in the sand.
USD/IDR: Consolidation around the 8550-handle is still in the script; scope for shallow dips given the bearish dollar. Nothing dealt in the overnight NDFs; closed at 8 575-8590.
USD/THB: Expect prices to soften in line with the regional trend but downmoves likely to be muted on intervention fears, political risks.
USD/PHP: Could test the 43.00-figure given the dollar moves overnight but the pair is likely to stall ahead of the 42.960-mark on underlying caution. NDFs dealt with moderate volume overnight in the 43.25-43.30 range; closed firmer at 43.18-43.23 after the 43.15-43.22.
USD/INR: The pair to take cues from USD/Regionals and a gap down at open is in the works. Eyes the 44.90-support. Inflationary concerns likely to keep dips fleeting. Overnight NDFs saw moderate volume in the 45.20-45.22 range; closed almost steady at 45.45-45.20 after the 45.16-45.19 open.
