Asia Summary and Highlights 28 Dec

Asia Session
We are hearing more comments from Ueda reported by the Japanese media NHK. While he mentioned there was no hurry in unwinding ultra-loose monetary policy and the risk of inflation running well above 2% and accelerating was only small, market participants seems to be focusing on his comment that the chance of moving rates out of negative in 2024 is "not zero". He also shot down the idea of policy change in the January meeting, as we all know the BoJ is waiting for spring wage negotiation to confirm wage momentum. USD/JPY dipped 0.44% to 141.18 as USD is trading broadly softer despite U.S. Treasury Yields taking a breather.

Regional equities ex Japan is performing strongly and seems to have support the Antipodeans in early Asia. AUD/USD had reached a session high at 0.6871 before giving back all gains and fell by 0.04% to 0.6844, NZD/USD also retraced most of its gains and ending barely 5 pips higher at 0.6346. USD/CAD slip 0.05% to 1.32 with oil up half a dollar after a red Wednesday. Elsewhere, EUR/USD is up 0.09% and GBP/USD is up 0.12%.

North America Session
The USD lost ground in North American trading against most currencies.  The move was flow and sentiment driven rather than new news, with EUR and GBP/NOK and SEK gaining a similar percentage and AUD and JPY somewhat less.  However, traders indicate that the difference is not major and the key point is that the intense 2024 Fed rate cut expectations and end of year flows are hurting the USD. 

The strongest performer against the USD was the CHF, which also surged against the EUR.  This is largely flow related.  Though some note that the SNB will likely cut less than the Fed and ECB in 2024, others note that the SNB has stopped selling FX reserves to reduce the balance sheet that removes a big flow in 2024.