Asia Summary and Highlights 5 June
Japan FM Katayama said ready to respond to FX
Asia Session
As USD/JPY flirts with the 160 level, we heard Japan FM Katayama suggesting readiness to respond to FX. It of course did little to reverse the trajectory of USD/JPY, barely keeping the pair under the figure. Fundamentally, we do see wage gains exceeding expectation at 3.5% y/y and could contribute to stronger inflation in a medium run. If such persist, the rate expectation could change from the currently 1% terminal rate we are seeing to as high as 2% but only time will tell. USD/JPY is trading 0.06% lower at 159.92.
It is reported that Oman's Mina al Fahal crude terminal on the Gulf of Oman has been forced to suspense oil loading from drone attacks. Such is the first time, Oman, a relatively neutral country, being dragged into the conflict. Major equity indexes are reacting negatively to the news. AUD/USD is trading 0.08% lower at 0.7128. NZD/USD is trading unchanged while USD/CAD slips 0.04%. Both Brent and WTI are slightly higher. Else, EUR/USD is up 0.04% and GBP/USD is up 0.03%.
North American session
With a cease fire deal between Israel and Lebanon’s government not being accepted by Hezbollah, the USD retraced most of its European losses. USD/JPY moved back to 160 and stabilized there, while EUR/USD slipped back below 1.1620 after peaking above 1.1640. EUR/GBP was marginally firmer but EUR/CHF softer. AUD/USD saw only a marginal correction from modest European gains holding near .7140 while USD/CAD was fairly stable near 1.39. Equities were firmer.
US initial claims saw a bounce to 225k from 212k in a week that included the Memorial Day holiday. Q1 US non-farm productivity was revised down to 0.3% from 0.8% as were , more surprisingly, unit labor costs, to 1.8% from 2.3%.