1) Overnight Asia Wrap
We opened with risk bouncing and the USD well off its NY highs. Asia’s initial move was to extend this USD dip which was further exacerbated by decent AUD demand at the Tokyo fix. The notable exception to this USD move was the NZD which was lagging after being downgraded by both Fitch overnight and then early in our morning by S&P. NZD bonds are roughly 60% held offshore and with only Moodys now assigning them a AAA rating its reasonable to expect some forced selling to arise from these ratings changes. The AUD had managed to very briefly trade onto a 98c handle but soon after the fixing we began a slow but steady slide lower. The CNY fix was low as expected given next week is the Golden Week holidays and that the US senate is to vote on Monday on the Chinese currency bill. There was a small bounce in Asian currencies after the CNY fix but soon the focus turned elsewhere. Equity markets had been largely in the black early on but as gains were erased the USD buying gathered momentum. We sold a decent amount of EUR mainly for European Real Money accounts pushing EUR through solid support at 1.3550 to the days lows. The AUD and NZD followed south, the former finding some support around 0.9750 from corporate Australia many of whom are rebalancing for their financial year end.
AZUMI SAYS EXCESSIVE YEN MOVES CONTINUING
JAPAN FINMIN AZUMI: WILL ACT DECISIVELY ON FX IF NECESSARY
CHINA SETS YUAN REFERENCE RATE AT 6.3549 AGAINST U.S. DOLLAR – 116 pips lower fix to fix
DJ S&P DOWNGRADES NEW ZEALAND FOREIGN L/T ISSUER CDT RTG TO AA FROM AA+
DJ CHINA SEPT HSBC PMI 49.9 VS PRELIMINARY 49.4, AUG FINAL 49.9 – REUTERS
HSBC CHINA SEPT PMI INPUT PRICES SUB-INDEX AT 59.5, HIGHEST IN FOUR MONTHS
2) Orderbook & Flow
EURUSD bids below around the 1.3400 handle with downside stops 1.3250 and 1.3300.
GBPUSD is sparse below with little before downside bids at the 1.5000 handle.
USDJPY stops below 76.30 with orders collecting around the 76.00 handle.
Overnight we were buyers of AUDUSD and USDSGD.
3) USD/Asia Run
USDKRW 1177.5 (Thursday London Open 1178.5)
USDINR 49.33 (49.22)
USDPHP 43.91 (43.64)
USDCNY1y 6.4380 (6.3965)
USDIDR 9195 (9105)
USDMYR 3.1955 (3.1940)
USDTWD 30.55 (30.40)
USDSGD 1.2975 (1.2945)
4) Opening Levels
EUR 1.3541
GBP 1.5586
JPY 76.58
CHF 0.8999
WTI 82.9
Brent 04.5
XAU 1627.6
Silver 31.11
X-Over 729
Greece 3536
Portugal 1082
Ireland 702
Spain 372
Italy 456
UK 10y 2.35
Ger 10y 1.94
US 10y 1.98
Bund 135.25
Spain over bunds 312
Italy over bunds 362
BeBanks Index 75.83
3m Eur Xccy -102.0
HSBC Global Research