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IFR Markets ForexWatch Asia Regional Daily Briefing
June 3, 2014 / 11:18 PM / 3 years ago

IFR Markets ForexWatch Asia Regional Daily Briefing

SYDNEY, June 4 (IFR) -

Headlines from Tuesday Night * Draghi is likely to signal that any interest-rate cut won’t necessarily be the final one, according to two euro-area central bank officials. (BBG) * Fed’s George senses some hesitation in household/business confidence, Fed should stop topping up balance sheet prior to first rate hike, while inflation has been low food/housing/tuition prices are rising * Fonterra’s GDT price index falls 4.2% w/an avg selling price of USD 3,756/tonne * US ISM-New York Index May 630.1, 627.4-prev * US Durables Ex-Def, R MM Apr -1%, -0.8%-prev * US Durable Goods, R MM Apr 0.6%, 0.8%-prev * US Factory Orders MM Apr 0.7%, f/c 0.5%, 1.5%-prev * US Durables Ex-Transpt R MM Apr 0.3%, 0.1%-prev * US Nondef Cap Ex-Air R MM Apr -1.2%, -1.2%-prev * US Factory Ex-Transp MM Apr 0.5%, 0.8%-prev * US IBD Economic Optimism Jun 47.7, 45.8-prev * EUR/USD volatile after CPI, 1.3586 then back to 1.3613 * EZ May CPI y/y 0.5% vs 0.7% prev, 0.7% exp * UK May N/Wide House Px 11.1% y/y vs 10.9% prev, 10.9% exp * UK May Cons PMI 60.0 vs 60.8 prev, 60.8 exp * EZ Apr Jobless 11.7% vs 11.8% prev, 11.8% exp Themes from Tuesday * Moves remain contained ahead of the ECB meeting on Thursday with modest short covering witnessed in EUR/USD and EUR/JPY. AUD/USD got squeezed post the RBA decision/statement but it quickly ran out of puff in London. Meanwhile NZD took another hit on a soft GDT milk auction - eight straight auctions of falling prices underlying a worldwide glut for milk products. * The exception on Tuesday was the US Treasury market where prices tumbled again with yields up sharply for a fourth consecutive session. As we head towards the close the US 10-yr UST yield is up 7bps at 2.60% while the 30-yr yield is also up 7bps at 3.44%. The unexplainable move lower saw the 10-yr yield hit 2.43% just a week ago. The 2.60% breakdown point offered resistance today but a confirmed move above could take us back towards the top of its recent range at 2.90%-3.00%. * Wall Street indices headed lower on their open as the Dow and S&P pulled back slightly from yesterday record closing levels. The moves however were less than half a per cent. A better than expected factory orders release (0.7% against a forecast of 0.6%) than provided a modest fillip. From here it was a low key affair and at the close all three indices were down around 0.1%. * European shares slipped on Tuesday in thin volumes and some benchmark indexes retreated from multi-year highs as investors held back from chasing stocks higher before Thursday’s ECB meeting. The FTSEurofirst 300 lost 0.4%, after hitting a 6-1/2 high on Monday. Trading volumes on the benchmark index represented only about three quarters of its average daily volume of the past three months. The Euro STOXX 50 index fell 0.2%, while Germany’s DAX which hit a record high on Monday just below the 10,000 mark, ended down 0.3%, at 9,920. * EUR/USD felt the bite of modest profit taking overnight. A non-descript Asian session had left the single currency trading just above 1.36 even. EUR/USD ticked down into the 1.3590’s ahead of the EZ CPI data and was marked down to 1.3585 on its actual release (0.5% f‘cast 0.7%). Buyers quickly swooped and EUR/USD ricocheted back to 1.3615. Massive option expiries at 1.36 the figure kept the pair close to 1.36 before consistent EUR/JPY buying along with higher UST yields took the single currency higher. EUR/USD topped out at 1.3648 where reportedly massive standing sell orders rest causing a re-think. EUR/USD pared some of its gains and headed to the close around 1.3629 - up 0.24% on the day. * USD/JPY was generally firm all evening albeit within a tight 102.30-56 range. EUR/JPY buying and surging UST yields provided the underlying support. USD/JPY heads towards the close just below its intraday high at 102.53 and up 0.15% on the day. * Short covering in AUD/USD post the RBA decision/statement took the pair to 0.9285 in late Asia and then to a marginal fresh intraday high of 0.9287 in early London. From here it was a slow drift lower with AUD/USD finally finding support in the 0.9240’s courtesy of AUD/NZD buying following another poor GDT milk auction. AUD/USD heads towards the close at 0.9264 - up 0.18% on the day. * NZD/USD tagged team with AUD/USD in the post RBA short squeeze but in lagging fashion. NZD/USD hit 0.8478 before momentum waned. This took AUD/NZD up to 1.0965 then things started to go pear shaped for the AUD. AUD/USD drifted back below 0.9250 taking NZD/USD down to 0.8450 and AUD/NZD back to 1.0930. The much anticipated GDT milk auction again disappointed with the result an eight consecutive price decline - down 4.2% w/an avg selling price of USD 3,756/tone. NZD/USD dropped like a stone to 0.8425 before bottoming out at 0.8418. As we head towards the close NZD/USD last trades at 0.8430 - down 0.3% on the day. AUD/NZD hit its 200-dma resistance level just above 1.0990 and now looks poised to make its long anticipated break to the upside to 1.12 and beyond. * Copper eased on Tuesday as investors worried about an expected settlement of a dispute in Indonesia that could restart concentrate exports and the impact of a probe at a top Chinese port that has halted shipments. China is also coming to the end of its peak demand period. LME copper ended down 0.87%, after climbing 1.2% on Monday for its biggest daily gain in three weeks. In other metals, the LME zinc market was starting to show signs of stress in spot supply with cash zinc moving to a premium against the benchmark contract on Monday. LME zinc ended up 0.24%, while aluminium shed 0.22%. Reuters News * Chinese steel futures dropped for a fourth session to hit an all-time low on Tuesday, reflecting pressure on demand from a weak property sector and hefty supply as markets reopened after a holiday weekend. Iron ore futures in Dalian also slipped for a fourth straight trading day to their lowest since their October launch, potentially weighing on spot prices that have already fallen by almost a third this year. Singapore iron ore futures slid more than 1% at one stage before closing down 0.44%. Spot iron ore added 40 cents to USD92.50 as the metal makes a slight comeback from its 4% slide on Friday. Reuters News * Spot gold snapped a five day decline closing up 2 dollars at USD1245.70. * The US Dollar index closed down 0.14% at 80.537. * The VIX index closed up 2.5% at 11.87. Wrap-up * Tuesday was one of mild profit taking and position adjustments ahead of the ECB on Thursday night and the US NFP data on Friday night. The moves were contained with the market nearly universal in their acceptance of a “package” from the ECB that includes a refi and depo rate cut and whilst other easing measures are expected no one is really confident in what shape or form they will be delivered. * There is still some room for the market to be either disappointed or pleased so last minutes adjustments should continue right up to the ECB announcement. Apart from these last minute position adjustments from those who are forced to do them - the rest are just likely to just sit on their hands. Well worn ranges should suffice now with players not willing to go out on a limb at this late stage. ASIAN CURRENCY OUTLOOK * USD/AXJ is set to open on Wednesday slightly higher from yesterday’s Asian session close. It was modest affair overnight with volumes curtailed in the lead into the much anticipated ECB decision which is quickly followed on Friday by US non-farm payroll data. USD/AXJ appears to be reacting to the US Treasury move higher in yields. The 10 and 30-yr bond yields were both up 7bps yesterday as last week’s slide in yields is quickly corrected. USD/THB bucked the trend yesterday falling 0.7% to 32.62 as confidence in Thai asset returns. * USD/KRW traded a moderate 1023.1-1025.9 range in Asia on Tuesday; last at 1023.1. The Kospi closed up 0.3%. * USD/SGD traded a modest 1.2557-1.2572 range in Asia on Tuesday; last at 1.2567. The Straits Times closed down 0.2%. * USD/MYR traded a 3.2260-3.2333 range in Asia on Tuesday; last at 3.2290. The KLSE index closed up 0.45%. * USD/IDR traded an 11788-11825 range in Asia on Tuesday; last at 11790. The Jakarta Interbank Spot Dollar Rate (JISDOR) was set at 11806. The IDX Composite closed up 0.6%. * USD/PHP traded a 43.78-92 range in Asia on Tuesday; last at 43.81. The PSE index closed up 1.35%. * USD/THB traded a 32.67-85 range in Asia on Tuesday; last at 32.69. The Set closed up 0.9%. * USD/TWD traded a 29.99-30.04 range in Asia on Tuesday; last at 30.01. The Taiex closed up 0.5%. * USD/CNY CNY was set in Asia on Tuesday at 6.1710 slightly higher than the previous 6.1695 fix. The OTC market traded a 6.2445-6.2550 range; last at 6.2541. USD/CNH last at 6.2555 - range 6.2466-6.2562. The 1-yr NDF was last quoted in Asia at 6.2565/6.2580. The Shanghai Composite closed up 0.0%. * USD/INR traded a 59.12-42 range in Asia on Tuesday; last at 59.40. The Sensex index closed up 0.7%. Economic Data Releases (GMT) 04 Jun 01:30 AU GDP 04 Jun 05:00 IN HSBC Markit Svcs PM

OVERNIGHT RANGES---------------------------INTRADAY RANGES -- Close 2100GMT NDFS OPEN HIGH LOW LAST VOL CURRENCY HIGH LOW CLOSE IDR 11850 11870 11850 11860-11880 N/A USD/JPY 102.56 102.27 102.51 INR 59.60 59.73 59.61 59.60-61 N/A EUR/USD 1.3648 1.3585 1.3627 KRW 1025 1027 1025.7 1026.5-26.8 N/A EUR/JPY 139.77 139.10 139.72 MYR 3.2325 3.2400 3.2340 3.2370-90 N/A GBP/USD 1.6782 1.6731 1.6749 PHP 43.85 43.96 43.88 43.92-94 N/A USD/CAD 1.0922 1.0891 1.0908 TWD 30.00 30.08 30.03 30.06-08 N/A AUD/USD 0.9287 0.9229 0.9265 CNY 1-mth Dealt 6.1850 6.1840-60 NZD/USD 0.8478 0.8418 0.8430 CNY 6-mth No Trades 6.2245-65 USD/SGD 1.2573 1.2557 1.2562 CNY 1-yr No Trades 6.2560-80 USD/THB 32.85 32.59 32.62 Equities Close Change %Change UST(Yields) Close Previous DJIA 16722 -22 -0.13 10-year 2.60% 2.53% S&P 500 1924 -1 -0.08 2-year 0.40% 0.39% NASDAQ 4234 -3 -0.08 30-year 3.44% 3.37% FTSE 6836 -28 -0.41 Spot Gold($) 1245.70 1243.60 DAX 9920 -30 -0.30 Nymex 102.82 102.45 Nikkei 15034 +98 +0.66 Brent 108.82 108.84

Reporting by John Noonan and Peter Whitley

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