Asia Summary and Highlights 3 September

Asia Session

USD/JPY got a foothold on the 147 handle after testing below in the early Asia hours but with sisk turn more sour as the Asia session progress with U.S. Treasury Yields erased most gains across the curve while JGB yields reaching session high. The market seems to be reversing moves on Monday to prepare for the NA players coming back from holiday, USD/JPY is now trading 0.2% lower at 146.54.

The Australian Q2 current account has come in lower than expected and is previewing a soft Q2 GDP to be released later in the week. But with current inflationary dynamics, we do not see such data to affect RBA's decision in a short run. With global equities in the red, AUD?USD bare more weight and is trading 0.72% lower at 0.6742, NZD/USD also down by 0.63% to 0.6192 while USD/CAD rose 0.24%. Else, EUR/USD is down 0.13% and GBP/USD is down 0.16%.

Latam/Europe Afternoon 

The USD is holding at better levels in the Latam morning/European afternoon, with the U.S. and Canada on holiday.  Traders do not see any fundamental move behind the USD multiday bounce, rather see it as a technical correction.  Aside from data and DM central banks this month, FX traders are also focused on asset markets.  U.S. Equities have recovered after the early August volatility and broken correlation with JPY movements.  However, equity strategists have divergent opinions, with some noting that U.S. stocks do not do well after the 1 Fed rate cuts as a slowing economy dominates and hurt earning prospects.  Any signs of a harder landing and equities could spur renewed USD losses against the JPY.

Elsewhere, the AUD has started to edge higher after the correction off recent highs against the USD. Though China manufacturing PMI was on the soft side, traders note that relative RBA to Fed rate prospects are more important and all the signs point to the RBA being slower than the Fed in easing in the next 6-9 months due to Aussie inflation.