Asia Summary and Highlights 26 September

Asia Session

The Tokyo area September Headline CPI came in at estimate of 2.2% y/y down from 2.6% in August. Ex fresh food also tread lower from 2.4% to 2% y/y while ex fresh food and energy remain at 1.6%. It seems to suggest the strength in CPI may not be as sustainable as the BoJ sees. Japan LDP has begun the vote for leadership election. The top three candidates are former defence minister Shigeru Ishiba, ex-environment minister Shinjiro Koizumi, and economic security minister Sanae Takaichi. In the meantime, USD/JPY remains it up move to trade 0.89% higher at 146.10 with U.S. Treasury yields broadly outperforming JGB yields.

The stimulus announced by the Chinese government earlier in the week takes effect on Friday. The People's Bank of China cuts RRR by 50bp and  7 day reverse repo rate by 20bps. Regional equities in China are supported but have reversed partial gains while HSI gains strongly. The AUD/USD is however beaten by stronger USD and is trading 0.25% lower at 0.6878, NZD/USD is trading 0.4% lower at 0.6302 while USD/CAD rose 0.19%. Else, EUR/USD is down 0.11% and GBP/USD is down 0.23%.

North American session

USD/JPY saw early losses ahead of the US data, bottoming at 144.11, but bounced after the data came in stronger than expected. Initial claims fell further to 218k from 222k while unchanged durable goods orders were more resilient than expected with a 0.5% rise ex transport. Q2 GDP was unrevised at 3.0% but income data saw historical upward revisions, lifting the savings rate. USD/JPY saw another brief move above 145, before slipping back to 144.65.

Other currencies showed little reaction to the data and later saw gains versus the USD, EUR/USD to 1.1180 and GBP/USD to 1.3415, seeing EUR/GBP softer near .8330. EUR/CHF was little changed near .9450. AUD/USD advanced to .69 but with oil weaker USD/CAD was little changed, and AUD/CAD advanced to near .93.