Overnight Price Action
The USD weakened across the board in response to Larry Summers’ announcement that he has withdrawn from being a candidate for Fed chairman. AUDUSD has outperformed, rising 0.9% to 0.9333, EURUSD is up 0.6% to 1.3369 and USDJPY is down 0.5% to 98.85. Most Asian currencies gapped stronger vs. the dollar, led by a 1.3% rally in the MYR to 3.2465. USDINR also dropped 1.3% at the open to 62.58 while USDKRW fell to 1082.80 where it met resistance from the Bank of Korea. USDCNY fixed 24pips lower to 6.1554, a level which pushed the CNY trade-weighted index down to its lowest since August 12.
Asian equities were generally stronger with the HSI up 1.2%, Taiwan up 1.3%, and Kospi up 0.6%. Markets in Japan and Malaysia are closed for public holidays today.
The Summers news has pushed yields lower across the board. Although there was no cash trading in Treasuries because of the Japanese holiday, futures implied a 13bps fall in yields from the New York close with bull flattening. IRS rates in Singapore are off 6 – 9bps, they are down as much as 18bps in Hong Kong, and the Chinese repo rate is off 9bps with 1 – 3yr rates down about 3bps.
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Credit Suisse