Asia Summary and Highlights 19 Feb
Red Sea tension persist
Japanese Finance Minister Shunichi Suzuki in an interview with Nikkei “The Bank of Japan holds jurisdiction over monetary policy. But there will be a phase when interest rates go up”
The Chinese equity market opened higher after observing the Lunar New Year
Asia Session
The Chinese equity market had reopened higher after observing the Lunar New Year. While over the weekend, the Medium-term Lending Facility rate was left unchanged, there has been rumor about a potential cut in 5yr rate, which seems to be boosting the equity performance. The reference rate has been fixed higher than market estimate for the onshore Yuan, which also gave the Aussie some support. AUD/USD is trading 0.2% higher on positive regional sentiment and broadly weaker U.S. Dollar, NZD/USD is also 0.25% higher at 0.6140 while USD/CAD slipped 0.03%.
Over the weekend, it was reported that there was another attack towards vessels in the Red Sea that made crews to abandon the ship. The on and off terrorism reminds us the geopolitical uncertainty but we are seeing restrained military action from the U.S. have kept market quiet for now. Japanese Finance Minister Shunichi Suzuki said in an interview with Nikkei that “The Bank of Japan holds jurisdiction over monetary policy. But there will be a phase when interest rates go up”, which just confirms the market consensus, without a hawkish tilt it is not going to have much lasting impact towards the JPY. The U.S. market is closed on Monday and JGB yields are barely a foot in the red. USD/JPY once again approaches the 150 figure by trading 0.16% lower for the session at 149.94. Elsewhere, EUR/USD is 0.07% higher and GBP/USD is 0.15% higher.
North American session
The USD rose across the board after the stronger than expected PPI data for January, though by the end of the session the move was largely reversed, with the USD ending little changed. PPI was considerably stronger than expected at 0.5% m/m core, and the US money market has further reduced expectations of Fed easing to just three cuts this year with the first not fully priced in until July. Initially, the USD saw the largest gains against the EUR and AUD, but for the moment EUR/USD remains in the 1.07-1.08 range that has held since the employment report, while AUD eventually outperformed.
Housing data released with the PPI showed starts down sharply but this was probably due to weather with permits little changed. The Michigan CSI saw only a marginal ruse to follow two straight strong gains. Fed’s Daly said three rate cuts was reasonable for 2024,