News and markets
Moody’s bank downgrades last night moved on from European banks to the big internationals. CS was lowered 3 notches. JPM MS GS Citi UBS Deutsche Barcap BNP Credit Ag and RBC down 2 notches. BAML HSBC RBS SocGen down 1 notch. Along with some slightly disappointing data this sent NY into a sharp risk-off correction. Asian stocks have taken a knock on the back of the NY stocks move last night. But Asia has not continued the sell-off in fact we have had a more or less flat day. SnP future has bounced up a tiny 3 to 1322, EUR and AUD have bounced a very small amount to 1.2560 and 1.0055, in Asia but even that modest move has been reversed in early London trading.
USDJPY spot has continued it’s move, and interest in this one is strong. Customers of all stripes are buying spot and high strike options. Spot dipped in Sydney time but Asia has paid it up from 80.02 to 80.52 so far. The talk on the street is that the two new BoJ members are well known doves and some BoJ action is expected at the next meeting. Also when USDJPY gets in a trend it tends to stay on it for a while, the old downtrend line was broken on Wednesday and the bulls are hoping for another run up like the one in February.
USDAXJ NDFs went higher in NY time, most 1m NDF opened flat in Asia (which means the spots opened higher) and have gone broadly sideways. INR is again the big exception. The trend is strong with this one and we have broken 57.00 in the spot just now with no sign that it is looking back. The RBI are in most days but their USD selling is not in sufficient size to have a lasting effect.
Oil has seen a very big fall this week with Brent losing over 8 usd to stand at 89.75 (front future) now. Gold and copper also posted falls against the resurgent USD yesterday. The effect of all this is clear on the FX market. Commodity exporter MYR is underperforming the other AXJ recently, while RUB and BRL continue to lead the sell-off in emerging FX around the world. Commodity importers such as TRY KRW PLN and HUF have done better on a comparative basis over the past 2 or 3 weeks.
On the data front, Taiwan unemployment today was very slightly higher at 4.25%
Later on we will see the Taiwan’s IP, Germany’s IFO survey and Canadian CPI.
FX options
Vols today are taking a break from the lower and steeper trend that we have seen for the earlier part of the week. Major vols took a bounce yesterday with the NY-time moves and have gone sideways in Asia.
1m JPY has gone up from 8.05 yesterday in Asia time to 8.6 middle now. The RRs have seen buying interest (for the topside) in the front dates and the 1m RR is up to 0.35 now from 0.1 earlier in the week.
In AXJ the vols opened at higher levels, SGD MYR and KRW have bounced most distance that they fell yesterday. INR has had the biggest move of the day, continuing the bid tone that we’ve seen all week. The curve is all higher by 1.0 in all tenors, 1m at 12.5 mid and 1y to 12.9.
NATIXIS